Zarmina Khan
Green financial development is essential to achieve sustainable development in Pakistan. Green financing is a tool to bring into line the fiscal flow with the goals of sustainable growth. There is a need for inventive approaches to bring synchronisation among environmental conservation, social progression, and economic development in Pakistan.
Pakistan formulated its first National Climate Change Policy (NCCP) in 2012 to address the climate change challenges, and the main goals of the NCCP are to lessen the climate change impact, support the strategies of adaptation, and boost Pakistan’s resilience, especially in vulnerable sectors such as Water, Energy, Agriculture, Forestry, Disaster Risk Management. NCCP focuses on the reduction of greenhouse gas emissions and the incorporation of climate change deliberations into national and regional planning and economic development plans and sectoral policies. Moreover, it emphasizes national and international financial resources to support climate actions and also encourages the private sector to invest in green technologies and climate-resilient projects because green finance’s role in the development of infrastructure is crucial, such as renewable energy projects (Hydropower, Solar and Wind), sustainable transportation, and energy-efficient buildings.
The Pakistan Climate Change Act, 2017 was passed to address the climate issues in Pakistan, and it established the Pakistan Climate Change Council, which is responsible for providing policy direction for climate change in Pakistan. Moreover, Federal government had also established the Climate Change Authority under the same act.
Pakistan launched its first National Finance Climate Strategy on November 14, 2024, to combat the climate change challenges, especially heatwaves, by activating the fiscal resources for climate extenuation and revamping efforts. It has been claimed that NFCS is based upon inclusivity, transparency, and accountability principles. NFCS mainly concentrates on elevating the climate-affiliated financing, enticing foreign investment, and bolstering the national financial structures.
NFCS will upsurge the climate finance flow from national and international sources and the financing from international organizations, and donors. NFCS will certainly progress the climate resilience of Pakistan, especially in agriculture and energy sectors, and will support the investment in low-carbon and green technologies to lessen the emanation, specifically in industrial, energy, and transportation sectors.
Green Finance could be mobilized through Green Bonds, Climate Funds and sustainable investment plans like carbon pricing, mechanisms, green tax credits, and sustainable business practices.
The State Bank of Pakistan introduced the Green Banking Guidelines (GBG) in 2017 to incorporate the environmental and social risks into general credit evaluation, ensuring an equitable environment for the financial sector and supporting economic growth. Moreover, GBGs focuses on financing green projects and decreasing the carbon footprint.
Green banking promotes eco-friendly activities, which assist the banks and their clients in determining and administering environmental risks, lowering carbon emissions, and mitigating socially detrimental actions.
The federal government, on the recommendation of the Ministry of Climate Change and Environmental Coordination, has authorized the Pakistan Policy guidelines for trading in carbon markets on November 16, 2024, to draw green investment. It has been claimed that Pakistan policy guidelines for trading in the carbon market will increase clean technology integration, encourage green investment, and tackle the challenges in agriculture, forestry, energy, and waste management. Pakistan’s carbon policy’s main target is to assist in transitioning towards a low or zero carbon economy alongside producing revenues from the carbon credits sales.
The carbon market in Pakistan could help achieve climate-affiliated goals by providing a substitute mode of stimulating resources to finance conditional nationally determined contributions. Carbon markets can promote the production of mitigation outcomes, internationally transferred mitigation outcomes, and certified emission reductions for exportations. Carbon markets could help improve access to modern eco-friendly technologies at affordable prices.
Environmental degradation like deforestation, water contamination, and air pollution pose challenges for the government, but by preserving ecosystems, improving waste management, and promoting sustainable agricultural practices alongside green financing, environmental damage could be reduced. Eco-friendly infrastructure would be beneficial in decreasing the country’s dependence on fossil fuels and reducing greenhouse gas emissions. A green economy will balance environmental protection and economic development in Pakistan.
The writer is Research Associate at School for Law and Development.
