Pakistan is looking at how to set up a carbon emissions market and has had discussions about how to link up the program with China.
Prime Minister Imran Khan’s administration has set up a committee to review the proposed mechanisms, which have the potential to expand the global trade in pollution credits and help Chinese companies offset the emissions they produce, according to an official who advised the government.
“We are looking at a credit-based market initially, which means you can offset in Pakistan and you can sell to bilateral countries,” said Malik Amin Aslam, who advises the prime minister on climate policy.
The remarks highlight ambitions to spread carbon trading in individual jurisdictions. Those efforts are moving forward even without an agreement about rules and procedures needed to govern a global market, which envoys at United Nations climate talks failed to reach earlier this week.
“The more countries that get a taste for this and start taking whatever action they can, the better,” Mark Lewis, global head of sustainability research at BNP Paribas SA’s asset management unit, said in an interview. “Hopefully they are doing more than dipping their toe in the water.”
While Pakistanis emit less than a fifth of the global average of greenhouse gases per capita, its pollution levels have accelerated in recent years along with economic growth. The nation’s gross domestic product rose 5.4% last year, up from 1.6% at the start of the decade, according to World Bank data.
Under the Paris Agreement on climate change, all nations agreed to take steps to rein in greenhouse gas emissions. Delegates seeking to sketch out a rulebook for how carbon trading could help meet those targets failed to reach an agreement at talks involving 200 nations that adjourned on 15 December.
With carbon trading, nations generate credits representing emissions cuts and then sell them to other nations or companies seeking to offset their own pollution. In theory, carbon markets help steer investment toward projects that deliver emissions cuts most efficiently.
China is the world’s biggest polluter and is building its own national carbon market. Pakistan’s initial discussions with its neighbor indicate Chinese companies might be able to offset their emissions by purchasing credits from Pakistan, Amin Aslam said.
“The benefit that we will get is that our environmental compliance will be met, and they will benefit by cheaper credits than their own market,” the official said.
Envoys at the UN talks tripped up over how to measure and verify cuts claimed under a future trading system. An earlier UN carbon market known as the Clean Development Mechanism lost credibility because of those issues, depressing the value credits generated under that system to a few euro cents.
Pakistan has hired consultants to examine whether “that data reliability is there and how we can improve that,” Amin Aslam said
Consultants said preparations will take two to three years, “but I told them to do it in six months,” the official said. “It’s very complex, but it is beneficial for those who have data reliability — if there’s no reliability then it doesn’t work.”
At the Madrid talks, Indonesia said it plans to start a pilot carbon market as soon as next year, part of its effort to meet emission goals the Southeast Asian nation committed to under the Paris deal.
In all, carbon markets are operating in about 50 jurisdictions worldwide, most notably in the European Union though the Emissions Trading System.-Bloomberg
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