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Public finance

Pakistan Proposes Carbon Tax on Fuel to Control Consumption and Promote Green Energy

Strategic Insights

— 1 min read

The federal government of Pakistan has announced a new carbon tax on petrol, high-speed diesel, and furnace oil as part of its efforts to reduce fuel consumption and generate revenue for environmental protection and green energy programs. According to the proposal, a carbon levy of Rs2.5 per litre will be introduced in the financial year 2025-26, increasing to Rs5 per litre in 2026-27. This move is aimed at addressing climate change challenges in line with Pakistan's agreement with the International Monetary Fund (IMF).

Key Takeaways:

  • The proposed carbon tax will be applied to petrol, high-speed diesel, and furnace oil, with an initial levy of Rs2.5 per litre in financial year 2025-26.
  • The levy will increase to Rs5 per litre in financial year 2026-27.
  • The initial Rs2.50 carbon levy is expected to generate between Rs6-7 billion per month.
  • The monthly revenue is projected to rise to Rs12-14 billion once the levy is increased to Rs5.
  • The revenue generated could be used to create incentives for the adoption of electric vehicles (EVs) and reduce CO2 emissions.
  • The government aims to reduce balance of payments stability risks by gradually shifting away from imported fuel products.

Statistics:

  • Rs2.5: the initial proposed carbon levy per litre.
  • Rs5: the proposed carbon levy per litre in financial year 2026-27.
  • Rs6-7 billion: the expected monthly revenue generated by the initial Rs2.50 carbon levy.
  • Rs12-14 billion: the projected monthly revenue generated by the Rs5 carbon levy.
  • 30%: the national goal for new passenger EV sales by 2030.
  • 50%: the national goal for two and three-wheeler EV market penetration by 2030.

Sources:

  • [Pakistan.gov.pk](Pakistan.gov.pk): The official website of the Government of Pakistan, where the proposal for the carbon tax was announced.
  • [News articles from reputable sources such as Dawn, Express Tribune, and Geo News](News articles from reputable sources such as Dawn, Express Tribune, and Geo News): Reporting on the government's proposal for the carbon tax.

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