Across the country, businesses are investing in renewable energy, waste management, cleaner production, efficient transport, agriculture and nature-based solutions.

And these are the same opportunities that can be turned into climate assets.

But there is an important distinction also: not all low carbon emission projects are carbon creditable also. Installing solar panels, planting trees or capturing methane does not automatically generate carbon credits. A project must demonstrate that its emission reductions or removals are additional, measurable and consistent with an accepted carbon-market methodology. It must also establish who owns the reductions, how they will be monitored and whether the expected revenue justifies the cost of registration and verification.

For corporate leaders, the first question should be: “can this project credibly produce saleable carbon credits?”

Carbon credits explained: What is actually being sold?

A carbon credit represents one metric tonne of carbon dioxide equivalent, or tCO₂e, that has been reduced, avoided or removed from the atmosphere and verified under an accepted standard.

Credits can be generated by different activities. A landfill may capture methane that would otherwise escape into the atmosphere. A clean-cooking program may reduce the amount of fuel consumed by households. A biochar facility may convert agricultural residues into a stable form of stored carbon. Forestry and agroforestry projects may increase carbon stored in trees and soil.

Readers seeking a more detailed introduction can consult Resources Future’s guide to carbon credits, project types and market standards.

Two carbon markets, one demand for high-integrity

Carbon markets broadly operate through two channels.

In voluntary carbon markets, companies purchase credits as part of climate, sustainability or net-zero strategies. Participation is generally not imposed by law, although buyers are increasingly expected to explain what they purchased, why they purchased it and how the credits relate to their wider decarbonisation plans.

Compliance markets operate under government or international rules. Regulated entities may be required to surrender eligible units against their emissions, while international transfers under Article 6 of the Paris Agreement require national authorisation and careful accounting.

For project developers, the route chosen affects methodology, documentation, buyers, price expectations and regulatory approvals. A credit that is acceptable to one buyer or program may not necessarily qualify for another.

Across both markets, however, the direction of travel is clear: buyers increasingly differentiate between credits on the basis of high-integrity. Carbon markets are becoming less tolerant of weak baselines and unsupported claims.

Pakistan now has a national policy framework

Pakistan’s carbon-market opportunity gained a clearer institutional foundation with the federal government’s approval of the Pakistan Policy Guidelines for Trading in Carbon Markets 2024. The framework recognises voluntary and compliance carbon markets and is intended to align carbon trading with Pakistan’s climate commitments and Article 6 of the Paris Agreement.

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