ISLAMABAD: In a major policy shift to fund climate adaptation and discourage fossil fuel use, the federal government has proposed a Rs2.5 per liter carbon levy on petrol, high-speed diesel, and furnace oil in the FY2025-26 budget. This levy will double to Rs5 per litre in the following fiscal year. Additionally, a petroleum levy on furnace oil will also be enforced.
This new carbon pricing measure is part of Pakistan’s broader climate strategy, reflected in the allocation of 8.2 per cent of the development budget and 6.9 per cent of the overall budget towards climate-related initiatives.
The government’s Annual Budget Statement emphasized the adoption of Climate Budget Tagging (CBT) to classify and track climate-sensitive spending, aligning expenditures with the National Climate Change Policy. Over 5,000 cost centres were tagged across 40 sub-categories, and this data was integrated into the Sustainable Development Programme Achievement (SAP) system to enhance transparency and oversight.
For FY2025-26, Rs603 billion has been earmarked for mitigation efforts focused on emissions reduction and clean technology, Rs85.43 billion for adaptation measures to enhance climate resilience, and Rs28.33 billion for institutional development, research, and capacity building.
The Green Pakistan Programme will receive Rs2.25 billion out of a total Rs2.76 billion climate allocation, while Rs325 million is set aside for strengthening the Ministry of Climate Change.
These steps underline Pakistan’s effort to integrate climate resilience into national development, using fiscal tools like green budgeting to mainstream environmental priorities across government planning and execution.
Story by Jamal Shahid
