By Ijaz Kakakhel

The government collected Rs22.25 billion under the Carbon Levy during the first three months of fiscal year 2026-27, achieving 44.5% of the annual budget estimate of Rs50 billion, according to an official Finance Division briefing.

The briefing, prepared for the Senate Standing Committee on Climate Change and Environmental Coordination and available with Wealth Pakistan, shows that the amount was collected by September 30, 2026.

The Carbon Levy, officially called the Climate Support Levy, was included in the Petroleum Products (Petroleum Levy and Climate Support Levy) Ordinance, 1961, through the Finance Act 2025.

According to the Finance Division, the measure was introduced as part of the government's commitment to the International Monetary Fund (IMF) under the ongoing Resilience and Sustainability Facility (RSF).

The levy has been applied since FY2025-26 to petrol, high-speed diesel, high-octane blending component (HOBC) and furnace oil. Its rate was initially fixed at Rs2.50 per litre for FY2025-26 and subsequently increased to Rs5 per litre for FY2026-27.

The government collected Rs50.15 billion through the levy during FY2025-26. For the current fiscal year, Rs50 billion has been budgeted, of which Rs22.25 billion was collected during the July-September period.

Regarding utilisation, the Finance Division said the revenue collected through the levy becomes part of the Federal Consolidated Fund under Article 78(1) of the Constitution.

The briefing also provided details of climate-related expenditure and budgetary provisions for FY2025-26 and FY2026-27, showing a substantial reduction in the overall amount recorded for the current fiscal year.

The total stood at Rs716.766 billion for FY2025-26, compared with Rs214.019 billion budgeted for FY2026-27, a decline of approximately 70.2%.

For FY2026-27, the climate-related budget comprises Rs70.462 billion for adaptation, Rs124.067 billion for mitigation and Rs19.490 billion for supporting areas.

The corresponding figures for FY2025-26 were Rs85.435 billion for adaptation, Rs603 billion for mitigation and Rs28.331 billion for supporting areas.

The largest reduction was recorded under mitigation, where the amount declined from Rs603 billion to Rs124.067 billion, a decrease of approximately 79.4%.

The Finance Division explained that the FY2025-26 mitigation figure included Rs587.3 billion in subsidies, which had been classified as climate-friendly because the energy mix had more than 45% contribution from renewables.

Excluding those subsidies, the remaining FY2025-26 mitigation amount was Rs15.7 billion, compared with Rs124.067 billion budgeted under mitigation for FY2026-27.

The briefing further stated that the Finance Division had budgeted more for climate-responsive and green expenditure than the amount collected through the levy.

Credit: INP-WealthPk