Pakistan Carbon Market, NDC 3.0 & Article 6 Strategy

Pakistan's Carbon Market and NDC 3.0: What Article 6 Means for Corporate Climate Strategy

Pakistan has now built the two pieces of climate policy that will shape corporate carbon accounting for the rest of this decade. The Policy Guidelines for Trading in Carbon Markets arrived at COP29 in November 2024. The country's third Nationally Determined Contribution, NDC 3.0, followed in September 2025.

Together they link national climate targets under Article 6 of the Paris Agreement to the numbers your finance team already has to disclose under the Securities and Exchange Commission of Pakistan (SECP) mandate. For any company mapping its Pakistan carbon market, Article 6, NDC 3.0 and corporate climate position for 2026, the question is no longer whether carbon credits are relevant. It is whether the credits you generate or buy will survive an auditor and count toward a target you have already published.

Spectreco, a sustainability technology and advisory firm with offices in Atlanta, Lahore, Lisbon, Dubai and Muscat, works with SECP-listed companies and banks on exactly this bridge. National carbon market policy sits on one side. IFRS S2, the ISSB's Climate-related Disclosures standard, sits on the other. Most Pakistani companies are still treating them as separate files. They are one workflow.

Does Pakistan Have a Carbon Market?

Yes. Pakistan launched its Policy Guidelines for Trading in Carbon Markets at COP29 in November 2024. The Ministry of Climate Change and Environmental Coordination (MoCC&EC) framework governs both voluntary and compliance carbon trading under Article 6 of the Paris Agreement, covering energy, agriculture, waste and forestry projects.

The guidelines are Pakistan's first national framework for structured carbon trading. Before this, credit activity ran on scattered voluntary projects dating back to the Kyoto Protocol era. There was no single rulebook, no clear authorisation path, and no government position on who owns the proceeds.

Sources: SPAR6C  |  UNEP-CCC

The MoCC&EC built the document over roughly two years with support from SPAR6C, the Supporting Preparedness for Article 6 Cooperation programme. It sets the rules for project authorisation and specifies that the government retains a share of proceeds to fund national climate action.

Sources: MoCC Pakistan (Policy Guidelines PDF)

What the guidelines cover

• Both voluntary and compliance carbon market activity, under one framework.

• Article 6 authorisation, including a transparent Letter of Authorisation process.

• Priority sectors: energy, agriculture, waste management and forestry.

• Retention of a share of proceeds to fund Pakistan's own climate projects.

Sources: UNEP-CCC

What Is Pakistan's NDC 3.0?

Pakistan's NDC 3.0, submitted to the UNFCCC on 23 September 2025, targets a 50 percent cut in projected greenhouse gas emissions by 2035. Of that, 17 percent is unconditional and funded domestically. The remaining 33 percent depends on international finance, technology transfer and capacity support.

NDC 3.0 is Pakistan's third climate pledge, after 2016 and 2021. A Nationally Determined Contribution (NDC) is the emissions target each country submits under the Paris Agreement and updates every five years. This one is more detailed and more costed than its predecessors.

The headline numbers matter for corporate planning:

• Projected emissions rise from 405 MtCO2e (million tonnes of carbon dioxide equivalent) in 2015 to 2,559 MtCO2e by 2035 on a business-as-usual path.

• The target cuts that trajectory to 1,280 MtCO2e by 2035.

• The unconditional 2030 contribution rises from 15 to 17 percent.

• Implementation is costed at USD 565.7 billion through 2035, roughly two-thirds of it conditional on external finance.

Sources: UNFCCC (Pakistan NDC 3.0)  |  NDC Partnership  |  UNDP Climate Promise

NDC 3.0 folds carbon markets directly into the plan. That is the signal for companies. The government intends to use Article 6 to help close the gap between the 17 percent it can fund and the 33 percent it cannot. Pakistan's phased SECP disclosure regime runs on a parallel track: our SECP Phase 2 IFRS S2 readiness guide covers which companies report and when.

How Article 6 Works, and Where Pakistani Companies Fit

Article 6 of the Paris Agreement is the rulebook for countries to cooperate on emissions cuts and trade the results. It was operationalised through the Glasgow rulebook at COP26 in 2021, and the crediting mechanism standards were approved at COP29 in November 2024. The plumbing is now largely built.

Sources: Eco-Act

The three mechanisms

Sources: Eco-Act  |  CEEZER

Corresponding adjustments decide credit quality

The core accounting rule is the corresponding adjustment. When a credit is authorised for international use, the host country adds one tonne back to its own inventory and the buyer subtracts one. This prevents the same tonne being counted twice, once by Pakistan toward its NDC and once by the buyer.

Sources: Columbia CGEP

For a Pakistani company, that rule sets up two possible roles:

• As a host: develop a project such as solar, methane capture or reforestation, get it authorised, and sell ITMOs for revenue.

• As a buyer: purchase authorised credits to apply against your own net emissions target.

Credits carrying a corresponding adjustment are higher integrity, and are expected to price above unadjusted voluntary credits. That premium is the market pricing in audit defensibility.

Sources: CEEZER / IETA

How Carbon Credits Fold Into Your SECP IFRS S2 Targets

This is the section that turns policy into a disclosure obligation. The SECP mandated IFRS S1 and IFRS S2 on 31 December 2024 under section 238 of the Companies Act, 2017. Phase 1 applies from reporting periods beginning on or after 1 July 2025 for the largest listed companies. The full phasing sits in our complete SECP IFRS S2 compliance guide.

Sources: SECP adoption (ProPakistani)  |  IFRS Foundation (Pakistan profile)

IFRS S2, the Climate-related Disclosures standard issued by the ISSB in June 2023, does not force you to set a target. But once you have set one, the standard requires you to disclose your planned use of carbon credits to meet any net greenhouse gas target. A vague net-zero press release is no longer enough. The reliance on credits has to be quantified.

Sources: IFRS S2 (IFRS Foundation)

Gross first, then net

The standard is strict about sequence. A net target is your gross target minus planned offsets, and it cannot be allowed to hide the gross picture.

• If you disclose a net greenhouse gas target, you must also disclose a gross target.

• Scope 1 (direct emissions) and Scope 2 (purchased electricity, heat and steam) cuts come before offsets.

• Credits are what remains after real reductions, not a substitute for them.

Sources: IFAC

What you must disclose about the credits

For any net target that relies on carbon credits, IFRS S2 asks you to describe:

• The extent to which, and how, the target relies on carbon credits.

• The crediting scheme the credits come from.

• The credit type: nature-based or technological, an emissions reduction or a removal.

• Permanence assumptions and whether the credits are third-party verified.

Sources: IFRS S2 GHG educational material

This is where Article 6 and IFRS S2 meet. An ITMO carrying a corresponding adjustment gives your auditor a cleaner answer to every one of those questions than an unverified voluntary credit does. Banks feel the sharpest version of this through financed emissions, the emissions tied to their loans and investments; our SBP green banking and financed emissions guide covers that overlap.

What Pakistani Corporates Should Do Now

Five steps turn this from a policy briefing into a plan your board and auditor can both sign off.

1. Confirm your SECP phase and target status. Know whether you fall in Phase 1, 2 or 3, and whether you have already published a net-zero or carbon-neutral claim that IFRS S2 will now hold you to.

2. Separate gross from net. Build a gross reduction pathway first. Treat credits as the residual, not the plan.

3. Decide your Article 6 role. Assess whether you have a creditable project to host, a residual gap to cover as a buyer, or both.

4. Vet credit integrity. Prioritise authorised units with corresponding adjustments over unadjusted voluntary credits.

5. Build the audit trail now. Capture scheme, credit type, permanence and verification before assurance begins in your second reporting year.

Spectreco's cloud-native ESG platform centralises the emissions and credit data this requires, and its Virtual Sustainability Office runs the reporting cycle so nothing slips before assurance.

Frequently Asked Questions (FAQs)

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Turn Policy Into a Defensible Target

Pakistan's carbon market and NDC 3.0 move carbon credits from a reputational nice-to-have to a disclosed, audited line in your SECP filing. The companies that map their Article 6 options against their IFRS S2 targets now will be the ones whose net-zero claims survive assurance. The ones that wait will be reverse-engineering a credit strategy under an auditor's questions.

Spectreco's Climate and Green Finance advisory team helps SECP-listed companies structure carbon market participation and fold credits into IFRS S2 targets that hold up. Talk to our Pakistan climate advisory team before you publish your next target.