Unlocking Climate Finance: Potential Carbon Credits from Renewable Energy

Usama Abdul Rauf and Muhammad Faisal Ali
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Usama Abdul Rauf: Pakistan Institute of Development Economics
Muhammad Faisal Ali: Pakistan Institute of Development Economics

No 2025:131, PIDE Knowledge Brief from Pakistan Institute of Development Economics

Abstract: Background:The Earth is what we all have in common, said Wendell Berry, highlighting our shared duty to protect the environment. Climate change has become one of the most pressing global challenges, affecting nations worldwide. Recognizing the urgency of this issue, countries have come together to find collaborative solutions. This commitment was evident during the 29th Conference of the Parties (COP-29) of the United Nations Framework Convention on Climate Change (UNFCCC), held in November 2024 in Baku, Azerbaijan. One of the major outcomes of COP-29 was the announcement of increased climate finance. Developed nations will provide USD 300 billion annually to assist developing countries in mitigating and adapting to climate change. This increase from the earlier USD 100 billion goal highlights the growing recognition of supporting vulnerable nations (UNFCCC, 2024). However, it is still USD one trillion less than the finance required. This enhanced financial assistance will be extended to developing nations through various channels, including carbon markets. Carbon credits have emerged as a vital mechanism within the compliance market, allowing countries and corporations struggling to meet their emission reduction targets to purchase credits from others. This system not only facilitates global emission reductions but also provides an economic incentive for nations to invest in green projects (Politico, 2024). By embracing renewable energy and carbon credit mechanisms, Pakistan has an opportunity to transform its approach to climate action. Further, the country can turn environmental challenges into economic opportunities, ensuring a sustainable future for its citizens. Yet we dont know the exact potential of carbon credits. Here we try to understand and estimate the approximate potential for carbon credits that can be extracted from electricity production through renewable energy in Pakistan.

Pages: 07 pages
Date: 2025
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