The federal government is planning to add a new carbon levy of Rs. 2.5 per litre on petroleum products in the upcoming 2025–26 budget. This rate will later increase to Rs. 5 per litre in the coming years. The new tax is expected to generate Rs. 45 billion in the next fiscal year, with the amount expected to double by 2027.
This carbon levy will be charged in addition to the current Petroleum Development Levy. However, it will not apply to kerosene and light diesel oil. The purpose of this tax is to raise money for green budgeting and environmentally friendly projects across the country.
This decision is part of Pakistan’s ongoing talks with IMF and supports the country’s broader goals of fiscal reforms and better economic management. By introducing this levy, the government aims to reduce environmental harm while also increasing its income.
Officials say the funds collected will help support sustainable energy efforts and other green initiatives. These steps are being taken to promote a cleaner environment, improve economic transparency, and meet international commitments on climate change and financial responsibility.
The federal budget for the year 2025–26 is set to be announced on June 10, 2025. Many eyes are on this budget as the government takes steps to balance economic needs with global climate goals. If implemented properly, the carbon levy could be a key move in supporting a more sustainable future for Pakistan.
