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Pakistan is facing potential threats to its exports and foreign direct investment (FDI) due to the possibility of failing to meet global climate change compliance requirements. As international buyers increasingly demand transparency from domestic producers regarding their environmental practices, Pakistan’s position in the global market could be jeopardized.
At the launch of the report titled “Pakistan’s Climate Crossroads: Private Sector Solutions to Climate Challenges,” hosted by the Overseas Investors Chamber of Commerce and Industry (OICCI) on Wednesday, OICCI President Rehan Shaikh highlighted the country’s critical need to comply with global climate standards. He noted that despite Pakistan’s minimal contribution of less than 1% to global greenhouse gas (GHG) emissions, there is a significant opportunity to attract $500 billion in international green financing by promoting climate-friendly projects.
Dr. Abid Qaiyum Suleri, Executive Director of the Sustainable Development Policy Institute (SDPI) and International Advisory Committee Member for COP29, emphasized that the government’s work on the carbon credit policy is nearing completion. He stated that finalizing this policy ahead of the COP29 meeting would enable Pakistan to attract financing through the sale of carbon credits to high GHG emitters, mainly from developed countries. The Ministry of Climate Change is currently consulting with provinces on implementing the policy, which falls under provincial jurisdiction.
Suleri also pointed out that the temperature in Karachi, Pakistan’s industrial hub, has remained two degrees Celsius above pre-industrial levels since the 1970s, in contrast to the global goal of limiting temperature increases to 1.5 degrees Celsius or less to mitigate climate change impacts.
He warned that climate compliance might be used as a geopolitical tool in the coming years. Rehan Shaikh reiterated the importance of climate compliance for maintaining competitiveness in international markets, cautioning that any increase in GHG emissions could harm Pakistan’s export potential.
Global buyers have already started linking their purchases from Pakistani producers to climate compliance since October 2023. It is crucial that all producers adopt these reporting practices by 2026. While some textile manufacturers and exporters, who contribute nearly 60% of Pakistan’s total export earnings, have begun to comply with climate guidelines, other key industries such as cement, fertilizer, and steel have yet to follow suit. Though these industries have a limited share in global exports, their future success will depend on adherence to climate standards and compliance with the Paris Agreement and COP protocols.
The production of methane during rice cultivation in Pakistan could also pose a threat to Basmati rice exports, which contribute significantly to the country’s annual rice export earnings of $3.7 billion.
Shaikh noted Pakistan’s progress in mitigating climate challenges, including large-scale renewable energy projects, the production of organic cotton worth billions of dollars, and plans to increase the sale of electric vehicles (EVs) to 30% by 2030. He emphasized the need for greater collaboration among government, private sector, and international stakeholders to address climate challenges effectively, stressing the importance of good governance and policy implementation.
Dr. Khalid Waleed from SDPI added that Europe has imposed a carbon tax on industries exceeding GHG emission benchmarks, forcing them to comply with environmental guidelines due to the high cost of production. He suggested that Pakistani producers, who generate significantly lower emissions, could benefit by selling carbon credits to those exceeding GHG limits.
