Following the initial carbon market knowledge exchange and capacity building initiative between SDPI and the Embassy of Denmark, this project seeks to advance Pakistan’s readiness for carbon market participation by strengthening private sector technical capacity, strengthening inter-ministerial policy coherence, and initiating a national dialogue on carbon trading mechanisms. It targets SMEs and Chambers of Commerce and Industry across Pakistan, supports enterprises in developing viable low-carbon projects, and provides a platform to showcase them, collectively drawing on Danish best practices to build an inclusive and knowledge-driven pathway for Pakistan’s engagement in international carbon markets.
The Context
Pakistan’s transition toward a low-carbon economy faces three interrelated constraints: limited technical knowledge among key market actors, fragmented governance structures across ministries, and insufficient coordination between the public and private sectors. Despite committing to a 50% emissions reduction by 2035 and ranking high among climate-vulnerable countries in the world, Pakistan has yet to establish a functional domestic carbon trading mechanism.
The previous phase of this collaboration (Unlocking the Potential of Carbon Markets in Pakistan) successfully built foundational awareness and produced a national carbon market roadmap; however, significant capacity and implementation gaps remain. SMEs and Chambers of Commerce, which represent a critical mass of Pakistan’s private sector economic activity, lack the technical expertise to develop and register carbon trading projects. Moreover, key government ministries – Climate Change, Commerce, and Finance – continue to operate in policy silos, limiting coordinated regulatory action.
This project responds to those gaps with a targeted, action-oriented programme that moves from awareness to implementation, equipping both public and private stakeholders with the tools, knowledge, and institutional frameworks needed to participate credibly in voluntary and compliance carbon markets.
The Approach
The project is structured around five integrated activity streams:
Capacity Building of Private Sector Stakeholders: Four regional workshops were conducted with Chambers of Commerce and Industry in Sindh, Punjab, KP, and Islamabad Capital Territory, complemented by tailored technical assistance to SMEs for developing carbon trading projects aligned with international standards.
Technical Assistance and Project Development: Hand-holding support was provided to at least 12 SMEs in preparing and evaluating low-carbon projects for participation in voluntary or compliance carbon markets, including feasibility assessments and alignment with global market protocols.
Policy Dialogues and Stakeholder Engagement: High-level policy consultations convening federal and provincial governments, private sector representatives, and Danish experts, including a national dialogue on “Carbon Markets: Opportunities, Options, and the Way Forward for Pakistan” and a dedicated policy discussion on “Charting the Course of Carbon Markets for COP29” were conducted.
Showcasing of Climate Mitigation Projects: 12 developed low-carbon projects were featured at SDPI’s Annual Sustainability Expo 2025, providing a high-visibility platform for innovative private-sector-led climate initiatives.
Communications and Awareness Campaign: A national communications campaign including podcasts, social media reels, and audio events was launched to broaden understanding of carbon markets across diverse audiences and sectors.
Results & Impact
The project delivered five categories of measurable results:
Enhanced Private Sector Readiness: Improved technical capacity among SMEs and Chambers of Commerce across four regions to engage meaningfully in carbon trading, moving Pakistan’s private sector from awareness to active market participation.
Strengthened Policy Coherence: Better alignment and coordination among the Ministry of Climate Change & Environmental Coordination, Ministry of Commerce, Ministry of Finance, provincial departments, and regulatory authorities for carbon market governance, reducing the fragmentation that has historically constrained progress.
Empowered SMEs: At least 12 enterprises received structured technical guidance and support to develop viable, internationally aligned carbon trading projects, creating a pipeline of credible low-carbon initiatives ready for market entry.
Increased Public Awareness: A national communications campaign generated broader discourse on carbon markets, climate finance, and green economic transitions across media, academia, and civil society.
Knowledge Exchange with Denmark: Adoption of Danish best practices in carbon market design and implementation into Pakistan’s emerging national framework was supported, deepening the bilateral green partnership under the Pakistan-Denmark Green Framework Engagement.
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Insights & Replication Potential
A key insight from this initiative is that carbon market development in developing countries requires a deliberate sequencing from awareness to implementation. It targeted the harder, more structural challenge of translating knowledge into market-ready action, particularly for SMEs that lack the internal capacity to navigate complex international carbon standards independently.
The regional workshop model, covering Sindh, Punjab, KP, and ICT, reflects an important design insight: carbon market capacity building must be geographically distributed to be equitable and effective. Concentrating interventions in Islamabad risks excluding the provincial private sector actors who represent the majority of Pakistan’s economic activity and emission-reduction potential.
The project’s phased, partnership-driven model is highly replicable across other developing countries at similar stages of carbon market readiness, particularly those in South Asia, Sub-Saharan Africa, and Southeast Asia that have made NDC commitments under the Paris Agreement but lack the institutional infrastructure to operationalize Article 6 cooperative approaches. The SDPI-Denmark collaboration provides a scalable template for bilateral knowledge exchange on green economic policy that can be adapted to other Green Framework Engagement partnerships globally.