Denmark’s Green Transition Model Can Work for Pakistan, Urgent Climate Action Needed in Pakistan: Danish Ambassador

Islamabad: The Sustainable Development Policy Institute (SDPI), in collaboration with the Embassy of Denmark, hosted a pre-budget dialogue on carbon taxation.

Danish Ambassador Jacob Linulf emphasized the pressing climate challenges facing Pakistan and underscored Denmark’s commitment to supporting Pakistan’s transition to renewable energy. He noted that Denmark’s successful shift from fossil fuels to clean energy serves as a model for Pakistan, given its vast renewable energy potential.

Ambassador Linulf stressed that energy efficiency is key to maintaining industrial competitiveness, advocating for smart carbon taxation and technological advancements to phase out outdated fossil fuel systems. He also called for firm and long-term government policies to foster innovation, attract investment, and position Pakistan as a global leader in green technologies. He urged businesses to embrace energy-efficient practices, particularly in the textile industry, to enhance exports to eco-conscious markets.

Justice Mansoor Ali Shah, Senior Puisne Judge of the Supreme Court, emphasized that carbon taxation should not merely be a revenue-generating tool but must align with environmental sustainability and economic resilience. Citing South Africa’s model, where 10% of carbon tax revenues are allocated to climate resilience projects, he called on global financial institutions to recognize adaptation credits and restructure carbon markets to support vulnerable nations. He highlighted the need for a differentiated carbon tax regime tailored to Pakistan’s economic realities.

Dr. Abid Qaiyum Suleri, SDPI’s Executive Director, noted Denmark’s support in helping Pakistan navigate carbon taxation complexities. He highlighted the upcoming Carbon Border Adjustment Mechanism (CBAM), which will tax carbon-intensive exports to the EU starting in 2026. Dr. Suleri warned that Pakistani exporters failing to pay local carbon taxes could face levies in destination markets. Dr. Sajid Amin Javed, SDPI’s Deputy Executive Director, framed climate change as a macroeconomic risk, stressing the inefficacy of short-term tax policies.

Senior economist Afia Malik highlighted Pakistan’s revenue shortfall, noting the potential of carbon taxation as a fiscal tool. However, she cautioned that carbon levies on fuel or vehicle registration could disproportionately burden low-income groups, leading to inflationary pressures. Atif Tanveer from Mari Petroleum warned against taxing the heavily regulated oil and gas sector, while Saad Ahmed called for sustainable transport solutions instead of blanket taxation.

Sobiah Becker from the Pak-German Climate Energy Partnership proposed a phased carbon pricing model, starting with a Rs1,500 per ton levy on high-emitting industries like cement, steel, and textiles, increasing to Rs2,500 per ton later. Ali Kemal, Chief SDGs, Planning Ministry, emphasized that carbon taxation must be implemented strategically to align with global market trends. He suggested that revenues be reinvested into social protection programs to ensure equitable distribution and manage expected resistance to carbon taxation.