Islamabad, Feb 17: Pakistan is at a critical juncture in its fight against climate change, with a unique opportunity to transform its renewable energy sector into a major source of revenue. Dr. Nadeem Javaid, Vice Chancellor of the Pakistan Institute of Development Economics (PIDE), emphasizes the urgent need to integrate renewable energy with carbon credit markets, highlighting the importance of climate finance as both an environmental necessity and an economic driver.
“Climate change is no longer a distant threat, but a present reality,” Dr. Javaid remarked, pointing out the increasing frequency of climate-induced disasters in Pakistan. These events underscore the direct connection between environmental security and economic resilience. Dr. Javaid stresses the need for bold policy decisions and strategic investments to tap into the country’s vast renewable energy resources.
In support of this, PIDE recently released an insightful knowledge brief titled “Unlocking Climate Finance: Potential Carbon Credits from Renewable Energy,” authored by Muhammad Faisal Ali and Usama Abdul Rauf. This report explores how Pakistan can generate revenue while simultaneously addressing climate change by leveraging global carbon credit markets.
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At COP-29, developed nations pledged to increase annual climate finance to $300 billion, though experts estimate this still falls short by $1 trillion. This funding gap has intensified the role of carbon markets, where companies and governments offset their emissions by purchasing credits from countries investing in sustainable projects. With abundant solar and wind resources, Pakistan is well-positioned to fully exploit this opportunity.
Despite existing policies on carbon trading, Pakistan’s reliance on renewable energy remains limited, with only 4.58% of its electricity generated from renewable sources. The potential for growth is vast. According to PIDE’s knowledge brief, Pakistan’s solar energy potential exceeds 100,000 MW annually, particularly in its Sunny Belt regions. By expanding renewable energy and implementing net metering, Pakistan could not only reduce its reliance on imported energy but also unlock significant revenues from carbon credits.
Currently, Pakistan exports around 481,863 MWh of solar electricity to the national grid. This results in a reduction of 475,840 tons of CO₂ emissions annually, generating an estimated $6.1 million in revenue at a conservative carbon price of $12.90 per ton. Projections suggest that expanding off-grid renewable energy could potentially raise revenues to between $21.5 million and $43 million, depending on market dynamics. As investment in renewable energy grows, these numbers could increase substantially.
The knowledge brief encourages policymakers, investors, and energy stakeholders to expedite the transition to renewable energy, improve carbon credit verification systems, and align with international carbon trading standards. By adopting the right policies, Pakistan has the potential to revolutionize its energy sector, attract climate finance, and ensure long-term economic stability. As Dr. Javaid stated, “PIDE is committed to providing data-driven policy solutions that support sustainable development and secure Pakistan’s energy future.”
