Four projects receive Letters of Intent under Article 6 framework to generate carbon credits and attract climate finance
ISLAMABAD: Pakistan has formally launched its carbon market by operationalising policy guidelines for carbon trading under Article 6 of the Paris Agreement, with the government approving four major climate projects aimed at generating carbon credits and attracting international climate finance.
According to the Economic Survey of Pakistan 2025-26, the government issued Letters of Intent (LoIs) to four projects during the July–March 2026 period, marking the country’s first practical implementation of market-based carbon trading mechanisms.
The initiative is designed to encourage investment in emissions reduction projects while enabling Pakistan to participate in international carbon markets through the generation and trading of verified carbon credits. Officials believe the framework will unlock new sources of climate finance and support Pakistan’s transition towards a low-carbon economy.
Four projects receive approval
Among the approved initiatives is the Biomethane, Bio-Pellets and Organic Fertilizer Project, which began in October 2024 with a 15-year crediting period. The project is expected to reduce greenhouse gas emissions by around 12.3 million tonnes of carbon dioxide equivalent (tCO2e) over its 25-year operational life, averaging approximately 492,000 tCO2e annually.
The facility will convert cow dung, fruit and vegetable waste into biogas and organic fertiliser, with the biogas subsequently upgraded into biomethane, providing a cleaner alternative fuel while reducing methane emissions from organic waste.
The second approved initiative, the Lakhodair Landfill Site Methane Capturing Project, is expected to generate around 225,000 carbon credits annually over a 10-year crediting period. The first issuance of carbon credits is anticipated in 2027.
The project aims to capture methane released from landfill waste, helping reduce greenhouse gas emissions, improve air quality, discourage open burning of waste and enhance public health through improved solid waste management.
The government has also approved the Pakistan Finance for Lowering Emissions in Waste and Water Sectors Project in Punjab, which is projected to generate approximately 1.18 million tCO2e in carbon credits between 2026 and 2030. The initiative includes wastewater treatment, improved access to clean drinking water and greater use of renewable energy in operational activities.
In Sindh, a similar project under the same programme is expected to generate around 500,000 tCO2e in carbon credits annually. The scheme focuses on strengthening municipal solid waste management while reducing emissions from the waste sector.
Climate finance opportunities
The operationalisation of Pakistan’s carbon market represents a significant milestone in the country’s climate policy by creating a framework for participation in international carbon trading under Article 6 of the Paris Agreement.
The government expects the mechanism to attract foreign investment into emissions reduction projects, support sustainable development, improve environmental outcomes and provide an additional source of financing for climate-related initiatives.
Officials say the newly approved projects demonstrate Pakistan’s commitment to expanding market-based climate solutions while contributing to global efforts to reduce greenhouse gas emissions and promote a greener, more resilient economy.