Pakistan Commits to Rs. 5 Carbon Levy on Petrol and Diesel Under IMF Climate Reforms

Pakistan has assured the International Monetary Fund (IMF) that it will impose an additional Rs. 5 carbon levy on petrol and diesel as part of a sweeping 13-point climate reform agenda, according to official documents. The commitment comes under the $1.3 billion Resilience and Sustainability Facility (RSF) program, with key targets set through 2027. Alongside the new carbon levy, the government will strengthen disaster risk financing to better manage natural disasters, and at least 30% of expenditures in all infrastructure projects will be allocated to climate-related spending. Every major development project costing over Rs. 750 million will now require a mandatory climate impact assessment. A climate budgeting system will be implemented at both federal and provincial levels. The Ministry of Finance has also announced subsidies to promote electric vehicles, with a target for 30% of new vehicles and 50% of motorcycles to be electric by 2030. Electricity subsidies will be limited to deserving consumers, with plans to end such support for affluent users. The government has also assured the IMF of efforts to reduce line losses and electricity theft, and will make energy labeling mandatory for appliances such as refrigerators, fans, LEDs, motors, and air conditioners. The sale of energy-saving appliances will be promoted until June 2027. Future development projects will require climate impact assessments, and a plan is in place to collect service charges for efficient water use in Sindh, Khyber Pakhtunkhwa, and Balochistan. Provinces will also increase revenue from irrigation systems, with a new water tariff adjustment system to be introduced in Sindh and Punjab. The Ministry of Finance will issue an annual climate budget report and improve financial planning for climate disasters at both the federal and provincial levels. Banks will be required to assess climate-related financial risks, and the government plans to introduce green finance and a green taxonomy to further align with global sustainability standards.