Pakistan's government is considering a carbon levy on vehicles over 2,000cc in the upcoming Budget 2026-27, with rates between 10% and 19.5%. The policy aims to discourage petrol and diesel vehicles while promoting electric vehicle adoption. Officials estimate the levy could raise over Rs142 crore in five years, funding environmental goals. Separately, the government plans tax breaks for locally made EVs, including reducing customs duty on batteries and motors to 1% and keeping sales tax at 1%. EVs may also be exempt from federal excise duty, capital value tax, and withholding tax. Hybrid vehicles would not receive similar concessions under the proposed policy. The proposals are under review by a committee led by Deputy Prime Minister Ishaq Dar. If passed, the measures could shift consumer behavior toward cleaner vehicles and support Pakistan's energy transition, though details on enforcement and revenue allocation remain unclear.
