By: Babar Akhtar
Published By:ANI News Agency
Embedded emissions will be a reality in Europe soon, and Pakistan should prioritize dealing with the trade of carbon, conversion to clean energy and industrial efficiency. Global trade is coming into an era where competitiveness won't only depend on price, quality, tariff and delivery time. Exporters will be called upon more and more to produce evidence of the production method, and the amount of carbon emitted to produce it. The clearest sign of such a transition is the European Union's Carbon Border Adjustment Mechanism (CBAM). Its definitive phase, which includes certain products such as cement, iron and steel, aluminium, fertilizers, electricity and hydrogen, started on 1 January 2026.
Pakistan's immediate exposure is limited. CMAB will not cover the textiles and clothing sector, which is the country’s biggest export to Europe. That is not to be equated with safety. European Union continues to be one of the key trade partners of Pakistan with bilateral trade at €12.2 billion in 2025, and Pakistan is the largest beneficiary country of the EU's GSP+ preference scheme. Such a trade link won't be protected by a regulatory move that the EU has made clear. CBAM is designed to have a wide reach, and its carbon reporting requirements are already influencing how private companies choose their suppliers, even before these requirements become mandatory. For Pakistan, the key question goes beyond whether its exports face a carbon charge today. It is whether Pakistani industry is ready for a trading environment where buyers increasingly base their decisions on the emissions generated during production and reliable data on environmental performance.
CBAM makes the emissions in an imported product payable. This makes a difference for accurate measurement, energy monitoring and independent verification, and not just a matter of reputation. For the manufacturers in Pakistan, installation of solar panels will not suffice. If a company is powered by renewable electricity, it may not demonstrate its environmental performance, if it has no credible carbon accounting systems, no digital production records and no internationally recognized reporting procedures. What's being measured isn't just the pollution-free performance of a factory, but whether the factory can make a record of that performance that is acceptable to a foreign auditor.
The next phase of China-Pakistan economic cooperation could play an important role in this transition. While CPEC has largely focused on roads, power generation, and major infrastructure projects, its next phase could help modernize Pakistan’s industries.Renewable energy equipment, battery storage, energy efficient machinery, smart meters, digital monitoring systems, and carbon accounting technologies will enable Pakistani companies to decrease both energy consumption and embedded emissions, and will create the measurement capacity that regulated markets now require. Special economic zones provide a natural laboratory for developing export-oriented industry that is less polluting. Operating industries there might be able to bundle renewable energy, modern machines, and digital traceability and standardized emissions reporting in one location. Chinese companies might provide technology and production expertise, whereas Pakistani companies build up the necessary capabilities to compete in highly regulated markets. Such zones would have more value in the operating practices they normalize, than the equipment they install.
There is no substitute for domestic policy reform, and technology cannot replace this action. Energy, trade, environmental and industrial affairs in Pakistan must be coordinated as emissions are treated either as an energy or a trade problem or as a part of environmental and industrial affairs and not as an economic issue for all to solve. Support will be required to the smaller exporters, without technical staff, to compile an emissions inventory, identify inefficient processes and meet the verification requirements. Establishing the national capacity on carbon measurement is a critical field, where Universities, testing laboratories and certification bodies have a very important role to play but with limited capacity. The challenge is not so much an environmental duty as it is an industrial competitiveness challenge. Some of the companies which will have measured and reduced emissions will soon be more attractive to European buyers and to companies, investors and supply chains increasingly seeking credible sustainability information. Those that cannot will somehow be filtered out from the agreement far well before any tariff may be put to be enforced.
CBAM is a good barometer of the evolving course of global trade. It is not the matter of how Pakistan behaves in the light of one of the European regulations. Essentially it is one question whether the nation will be able to modernize its production base before the carbon efficiency establishes itself as a general standard of international commerce. However, if the objective is to not only import clean energy equipment, but to build technological, conceptual, and industrial enterprise for the production of cleaner goods and showcase, then there is a potential for CPEC to facilitate such change, albeit carefully planned. The new trading system is leading to carbon efficiency being priced as a cost of access to markets.
