In April, Pakistan signed its first-ever bilateral carbon market agreement with Norway under Article 6 of the Paris Agreement, a deal described as a "historic milestone" by the climate minister. Back then, the description did not seem an exaggeration but truly a milestone. Underlying it, Pakistan had formally joined the global carbon market: a way to earn money from its environmental capital and direct international finance towards its climate transition.
Two months later, the federal budget was announced, and it was as if the Norway deal had never happened.
No new budget allocations were made towards the measurement and verification systems that are a basic requirement of carbon markets. No investment was made in climate finance education and training, which is needed to develop the professionals required to structure and negotiate carbon deals. No ring-fenced fund was established to ensure a fair share of carbon market-generated income for the communities whose land does the actual carbon mitigation work.
The Climate Change Division was allocated Rs2.78 billion, and no new development project has been approved for the next year. A deal was signed. Then the government moved on, presumably assuming that signing is doing. It is not. As a research intern on Pakistan's carbon market frameworks under the Global Green Growth Institute, I want to make my point about exactly what is not being done, and the price we will pay for it.
There is a number in this year's budget that deserves far more attention than it has received. Pakistan is targeting to receive Rs2.026 trillion from climate- and green-linked revenues and levies in 2026–27, including taxes on petroleum, high-emission vehicles, and green-labelled instruments. These are presented to the general public as climate measures. However, for every Rs100 collected through these climate-related taxes, only Rs10.6 is used for climate action. The remaining Rs89.4 goes to the general treasury.
This is not climate policy. This is a brand of climate-on-revenue instrument.
While ordinary Pakistanis have to pay more at the pump, the systems that will ensure their protection from climate disasters remain unfunded, with the carbon levy on petrol and diesel set to double this year. The contradiction would be troubling in any year, but it is particularly damaging when Pakistan has signed its first carbon market deal without any practical implementation.
By 2035, Pakistan will require $565.7 billion in climate investment to fulfil its own climate commitments
Carbon markets are not contracts on paper. They are systems that need to be designed, operated, and managed. To create a verified carbon credit, the currency of this market, Pakistan, needs to be able to demonstrate, to international standards, at least three things. First, it has actually reduced a certain amount of carbon dioxide. Second, that it would not have reduced carbon dioxide without the project. Third, that the reduction is permanent. This calls for measurement infrastructure, independent verification bodies, trained professionals, and transparent governance frameworks. None of this exists at the scale required.
The value of Pakistan's renewable natural capital, which includes its forests, agricultural land, coastal mangroves, glacial river systems, and potential renewable energy resources, is estimated at $474 billion. It is not a theoretical number but a real asset that the global carbon market will pay for if Pakistan can prove and sell it. But right now, we cannot. We have the assets but not the architecture.
Countries that developed this approach early, such as Costa Rica, Rwanda, and Kenya, are now profitably harvesting the rewards of carbon markets. Pakistan is still creating policy plans and signing agreements without the requisite institutional capacity to execute them. The Norway agreement will remain symbolic until the budget reflects what implementation actually costs.
In total, Pakistan's carbon dioxide emissions account for less than 1 per cent of global emissions. However, the floods of 2022, stemming from a climate catastrophe beyond Pakistan's control, resulted in $30 billion in losses, submerged a third of the country, and derailed years of development progress. Since then, we have been making the moral case at international forums: we suffer the most from what we caused the least.
That argument is true. However, it is becoming insufficient. The international climate finance that Pakistan requires, and which carbon markets can bring, will be directed towards those countries that demonstrate institutional seriousness rather than vulnerability.
Vulnerability gets sympathy, while institutional readiness gets funding and projects.
By 2035, Pakistan will require $565.7 billion in climate investment to fulfil its own climate commitments. No single budget will fill that gap. However, any budget that treats climate as a source of revenue rather than a national priority only exacerbates the situation. As long as we continue to build budgets without investing in climate systems each year, we will remain behind the nations competing for the world's climate funds.
To conclude, I would say that a serious follow-through on the Norway deal deserves a budgetary response commensurate with its ambition. That requires the protected allocation of a specific share of climate-related levies to finance the development of the measurement and verification infrastructure needed for carbon markets.
It requires investment in the education of skilled professionals, scientists, lawyers, and economists who can transform Pakistan's environmental resources into bankable projects. It means providing clear mechanisms for paying farmers, forest communities, and coastal populations who generate carbon value through carbon income.
Most importantly, the carbon market agreement with Norway is not the end of a diplomatic process but the beginning of an institutional one. A signed contract without the capacity to implement it is not a milestone. It is a missed opportunity to wear the costume of a milestone.