ISLAMABAD – Pakistan’s renewable energy boom can unlock billions in climate finance, as country’s carbon credit earnings can be increased to up to $43 million annually by expanding off-grid renewable energy (RE).
Transitioning to clean energy sources presents a promising avenue for Pakistan to both mitigate carbon emissions and strengthen its economic prospects, said Pakistan Institute of Development Economics(PIDE).
PIDE has released a knowledge brief, “Unlocking Climate Finance: Potential Carbon Credits from Renewable Energy,” highlighting how Pakistan can generate revenue while combating climate change by tapping into global carbon credit markets.
By leveraging solar energy sources and participating in carbon credit markets, Pakistan can not only earn revenue but also significantly reduce its carbon footprint. The potential revenue from the current RE production in Pakistan is about $21.5 to 43 million, the report said. Expanding solar energy generation would amplify these benefits significantly. If Pakistan were to annually increase its RE capacity by an amount equal to the current level, the country could potentially secure carbon credits worth $21.5 to 43 million each year, a fundamental aspect of Pakistan’s energy transition for a greener and sustainable future and ensuring a better tomorrow for future generations.
A carbon credit is a tradable certificate representing the right to emit. These credits are generated through activities that reduce, avoid, or sequester emissions, such as RE projects, reforestation, or energy efficiency initiatives.
Renewable energy is the opportunity for Pakistan to reduce carbon emissions, lower electricity costs, alleviate power shortages, and enable the sale of Certified Emission Reductions (CERs) in the international market. According to NEPRA, currently, only 4.58% of total electricity generation is coming from renewables, highlighting substantial room for growth in this sector. Moreover, electricity generation from RE sources including solar and wind is five times cheaper than other electricity generation methods in Pakistan.
At COP-29, developed nations pledged to increase climate finance to $300 billion annually, yet this still falls USD 1 trillion short of what is needed. This financing gap has amplified the significance of carbon markets—a mechanism where corporations and countries offset their emissions by purchasing credits from nations investing in green projects. Pakistan, with its abundant solar and wind resources, has yet to fully capitalize on this opportunity. Despite policy guidelines for carbon trading, only 4.58% of Pakistan’s electricity currently comes from renewables—a stark contrast to the country’s untapped potential.
According to the knowledge brief, Pakistan’s solar energy potential exceeds 100,000MW annually, particularly in the Sunny Belt regions. Expanding RE and net metering could not only reduce reliance on imported energy but also unlock millions of dollars in carbon credit revenues. Consumers in Pakistan already export approximately 481,863 MWh of solar electricity to the national grid. Given an emission rate of 1 ton of CO₂ per MWh, this equates to 475,840 tons of CO₂ avoided annually—a potential revenue of USD 6.1 million at a conservative carbon price of USD 12.90 per ton. Future projections suggest that expanding off-grid renewable energy could increase earnings to between $ 21.5 million and $ 43 million, depending on market pricing mechanisms. With scaled-up investments, these figures could grow exponentially.
The knowledge brief urges policymakers, investors, and energy stakeholders to accelerate renewable energy adoption to maximize carbon credit revenues, strengthen carbon credit verification systems to meet international standards, and align with global carbon trading frameworks to secure Pakistan’s position in the international carbon market. With the right policies, Pakistan can transform its energy landscape, attract climate finance, and ensure long-term economic resilience.
