Pakistan's federal government is considering a carbon levy of up to 19.5 percent on vehicles above 2,000cc as part of the Budget 2026-27. The proposed measure targets fuel-intensive cars to reduce emissions and generate revenue. At the same time, the government plans major tax incentives for locally manufactured electric vehicles, including reduced customs duties on EV batteries and motors, a 1 percent sales tax on parts, and exemptions from federal excise and capital value taxes. Hybrid vehicles may not receive similar benefits, as the policy focuses on full electric mobility under Pakistan's New Energy Vehicle strategy. Officials estimate the carbon levy could raise over Rs. 1.42 billion in five years while steering consumers toward cleaner transport. The proposals are under review by a high-level committee ahead of the final budget decision.
