Pakistan's government is proposing to double the carbon levy on petroleum products from Rs2.50 to Rs5 per litre starting July 1, 2026, according to budget sources. The move is part of the upcoming FY2026-27 federal budget and is framed as both a revenue measure and a climate policy commitment. If approved, the higher levy will directly increase petrol and diesel prices, affecting transport costs and household budgets across the country. The proposed hike comes shortly after the government announced a Rs22 per litre reduction in petrol and diesel prices, bringing petrol to Rs381.78 and diesel to Rs380.78 per litre. Officials described that cut as a relief measure made possible by fiscal space, while also noting that over Rs130 per litre in costs had been absorbed during global price pressures. The carbon levy increase would partially offset that relief. The article does not specify how the carbon levy revenue will be used or whether it will fund clean energy or emissions reduction programs. For carbon market observers, the key question is whether this is a genuine carbon pricing mechanism tied to decarbonization goals or simply a revenue tool. The lack of detail on revenue allocation makes the climate commitment claim hard to evaluate.
