KARACHI: The government of Pakistan has decided to impose a carbon levy on petroleum products starting in the fiscal year 2025-26, aiming to generate revenue and encourage environmental accountability in the energy sector.
Under the proposed plan, the federal government will levy a PKR 2.5 per litre carbon charge on motor spirit and high-speed diesel during FY 2025-26. The levy will be gradually increased to PKR 5 per litre in FY 2026-27, signaling a phased approach to carbon taxation.
Similarly, a carbon levy on furnace oil will be set at PKR 2 per litre (equivalent to PKR 2,665 per metric ton) in FY 2025-26, with an increase to PKR 5 per litre in FY 2026-27. This levy will be applied alongside the existing petroleum levy, as per the rates determined by the federal government.
The initiative is expected to be formalized through amendments to the Petroleum Products (Petroleum Levy) Ordinance of 1961, sources said. The amendment will lay the legal groundwork for implementing the revised taxation structure on petroleum products.
The government’s decision comes amid broader discussions on energy pricing and fiscal measures to manage economic stability. Analysts suggest that while the carbon levy could help raise additional revenue, its impact on fuel prices and consumer costs will be a key factor in public and industry responses.
Further details on the implementation of the levy are expected to be outlined in the upcoming budget announcement for FY 2025-26.