Islamabad, June 28, 2025 — In a major step toward sustainable fiscal and environmental reforms, the government of Pakistan has officially enforced the Climate Support Levy from July 1, 2025.
This measure, incorporated under the Finance Act, 2025, replaces the previously proposed carbon levy that was initially outlined in the Finance Bill, 2025.
The newly introduced climate support levy is designed to generate funds aimed at addressing climate-related challenges, including infrastructure adaptation, emission control initiatives, and green energy transition. The levy reflects the government’s growing commitment to mitigating the impact of climate change while simultaneously raising non-tax revenue in a resource-constrained economy.
Under the provisions of the Finance Act, 2025, the climate support levy will be applicable at a rate of Rs. 2.5 per liter on Motor Spirit and High-Speed Diesel during the Financial Year 2025-26. The levy amount will be increased to Rs. 5 per liter starting from the Financial Year 2026-27, signaling a gradual approach to help consumers and industries adjust to the change.
Additionally, Furnace Oil will also be subject to the same climate support levy, initially set at Rs. 2.5 per liter (equivalent to Rs. 2,665 per metric ton) in FY 2025-26. From FY 2026-27, the rate will double to Rs. 5 per liter, in addition to any existing Petroleum Levy as notified by the federal government.
Officials explained that the climate support levy is not just a revenue-generating tool, but also a policy mechanism to steer Pakistan’s energy consumption toward cleaner alternatives. The funds collected through the levy will directly support national efforts to combat climate-related disasters, promote environmental sustainability, and reduce dependency on fossil fuels.
This initiative places Pakistan among a growing number of developing nations implementing green fiscal instruments. Experts believe that the climate support levy—if used transparently—could enhance the country’s international credibility in climate finance and strengthen its case for foreign support and partnerships under global climate agreements.