Faiza Tehseen

By framing and effectively implementing the cap-and-trade policy, Pakistan can not only reduce environmental pollution but also foster revenue generation, innovation, and green technologies and create more work opportunities.

Cap-and-trade is a system that limits aggregate emissions from a group of emitters by setting a “cap” on maximum emissions. It is characterised as a market-based policy to reduce overall emissions of pollutants and encourage business investment in fossil fuel alternatives and energy efficiency. Talking to WealthPK, Aijaz Nizamani, former secretary of Sindh Forests and Wildlife Department (SFWD), said by selling carbon credits from the mangroves in 2022, the Sindh government earned about Rs3.5 billion. “These carbon credits were sold at $15 per tonne. The credits were sold in 2023 on the Singapore Carbon Exchange at varying rates from $30 to $50 per tonne.” Aijaz said that the Sindh government would continue to receive the benefit for the next 59 years.

“This will encourage investors to invest in the carbon market of the province.” He said both the government and private sectors needed to embark upon a cap-and-trade mechanism. “Reforestation, replantation and many other techniques can be adopted to produce carbon credits. By properly managing the carbon credit-producing sources, Pakistan can earn handsomely through the cap and trade. Policymakers in Pakistan must frame a cap-and-trade policy and ensure its enforcement effectively.”    Discussing with WealthPK the need of framing the cap-and-trade policy to fetch the socioeconomic and environmental benefits, Muhammad Yousaf Khan, Chief Conservator Forests, Northern Forest Region, said the primary goal of in-kind policies should be to incentivise the greenhouse gas (GHG) reduction to mitigate the impact of CO₂ and other gases on the environment.

“The carbon markets are becoming the strong hubs of future investment.” He said Pakistan could earn socioeconomic benefits from a cap-and-trade system. He said it was also important to conduct regular awareness sessions to attract local and foreign investors to invest in this sector. Talking to WealthPK, Kashif Noor Khawaja, an environmental specialist at the World Bank, said carbon markets were the best instruments to transfer capital to developing economies like Pakistan.

Credit: INP-WealthPk