Islamabad inks ‘historic’ carbon market deal with Oslo under Paris Agreement

• Envoy terms deal new phase in environmental cooperation.
• Norway interested in cooperation across sectors: envoy.
• Deal marks shift to carbon market implementation: minister.

Pakistan signed its first bilateral carbon market agreement under the Paris Agreement with Norway, marking a step towards attracting climate finance, according to an official statement issued on Wednesday.

The memorandum of understanding (MoU), signed under the Ministry of Climate Change and Environmental Coordination, will enable Pakistan to develop carbon credit projects and transfer emission reductions to Norway.

Minister for Climate Change and Environmental Coordination Musadik Malik described the agreement as a “historic milestone”, saying it marked Pakistan’s shift from carbon market preparedness to implementation.

“This is Pakistan’s first bilateral agreement under Article 6.2 and an important step towards implementation,” he said, adding that it would create a pathway for international cooperation and investment in climate-related sectors.

Under the arrangement, Pakistan can generate carbon credits through projects in renewable energy, agriculture, transport and waste management.

These credits may be traded as internationally transferred mitigation outcomes (ITMOs).

Officials said the agreement comes at a time when Pakistan is facing increasing climate risks, including floods and heatwaves, and could help mobilise international finance.

Malik emphasised that carbon markets should contribute to broader economic and social goals.

“They must help countries like Pakistan finance transition pathways, create jobs, attract technology and deliver real benefits to communities,” he said.

The minister noted that Pakistan had approved national policy guidelines for carbon trading in January last year and was now working to establish the regulatory and reporting systems required to operationalise the market.

Speaking at the signing ceremony, Norway’s Ambassador to Pakistan Per Albert Ilsaas said the agreement marked a new phase in bilateral environmental cooperation.

“Pakistan is among the countries most affected by climate change, and we believe this partnership can deliver both measurable emission reductions and real development benefits,” he said.

The ambassador noted that Norway, which aims to achieve climate neutrality by 2030, is seeking to purchase ITMOs to go beyond its formal climate commitments.

Norway is not purchasing ITMOs to meet its nationally determined contribution targets, he said, adding that the country was purchasing them to achieve climate neutrality beyond those commitments.

Ilsaas said that Norway’s Global Emission Reduction Initiative, launched in 2024 with a budget of $1.5 billion, would help channel carbon finance to partner countries, including Pakistan.

He added that Norway was interested in large-scale cooperation across sectors such as renewable energy, industry and agriculture, rather than focusing solely on individual projects.

Officials from both sides said the agreement could enhance Pakistan’s access to climate finance and private investment while supporting efforts to achieve low-carbon growth and meet its commitments under the Paris Agreement.