Pakistan Signs First-Ever Carbon Trading Deal with Norway Under Paris Agreement Article 6.2

Pakistan has signed its first bilateral carbon trading agreement, partnering with Norway under Article 6.2 of the Paris Agreement — the framework that allows one country to fund emissions-reduction projects in another and count the verified reductions toward its own national climate target.

The Memorandum of Understanding was signed by Federal Minister for Climate Change Musadik Malik and Norway's Ambassador to Pakistan Per Albert Ilsaas. It opens the door for Norwegian capital to finance verified emissions cuts in Pakistan across clean energy, agriculture, transport, and waste management, with the resulting Internationally Transferred Mitigation Outcomes (ITMOs) flowing back to Norway's carbon-credit ledger.

Why Norway, why now

Norway has committed to climate neutrality by 2030 — five years ahead of most EU countries, and well ahead of what its own domestic abatement potential can realistically deliver. To bridge the gap, Norway needs to buy verified emissions reductions from countries where the marginal cost of cutting a tonne of CO2 is much lower. Pakistan, with high-carbon-intensity grid generation and a young renewables sector, is precisely that kind of market.

Norway's Global Emission Reduction Initiative, launched in 2024 with a USD 1.5 billion budget, is the financing vehicle behind this deal — and similar agreements Norway is signing with other developing-country counterparts. Pakistan's MoU positions it as one of the early movers, with the chance to set bilateral terms that subsequent deals will benchmark against.

What gets funded in Pakistan

The MoU explicitly names four priority sectors for ITMO-generating projects:

• Clean energy — utility-scale solar and wind plus storage, displacing furnace-oil and LNG generation that today set Pakistan's marginal electricity cost. This is the single largest near-term ITMO opportunity given the high carbon intensity of avoided generation.
• Agriculture — methane abatement in rice cultivation, livestock manure management, and improved fertiliser practice.
• Transport — electrification of two-wheelers and public transport corridors, intersecting directly with Pakistan's EV Policy 2025-30.
• Waste management — methane capture from landfill and improved municipal waste processing in Pakistan's larger cities.

The institutional plumbing

Pakistan's federal cabinet approved the country's first national carbon trading guidelines in January 2025 — a precondition for any Article 6.2 deal to be structurally viable. Work is now underway to operationalise the supporting infrastructure: regulatory rules, MRV (measurement, reporting, verification) systems, and the bilateral matching mechanism that links Pakistani projects to Norwegian credit buyers.

This is where most Article 6.2 deals fall down — the negotiation is the easy part, the verified-delivery-of-reductions plumbing is hard. Norway's leverage here is significant: it has experience operationalising similar mechanisms with Switzerland, Ghana, and Senegal.

The corresponding adjustment question

Every tonne of CO2 reduction Norway counts toward its own target cannot also be counted in Pakistan's Nationally Determined Contribution (NDC). The Paris Agreement requires a "corresponding adjustment" — Pakistan deducts the credited reduction from its own ledger when Norway adds it. That accounting protection has to be tightly enforced or Pakistan loses NDC integrity without compensating gain.