Sazgar Engineering Works says a potential carbon tax could increase energy, compliance and supply chain costs, particularly under tighter climate policies.
KARACHI: Sazgar Engineering Works Limited has identified the potential introduction of a carbon tax or levy in Pakistan as a long-term climate-related transition risk that could increase its operating and supply chain costs.
The company said a potential carbon tax could affect energy-intensive industries by increasing the cost of carbon-intensive operations and energy use across the value chain.
According to its climate risk assessment, the exposure is linked to both upstream activities and the company’s own operations, with the risk classified as a long-term concern.
Low-warming scenario poses higher risk
Sazgar assessed its potential financial and operational exposure under different climate scenarios.
Under the high-warming scenario (SSP5-8.5), the company assessed carbon tax exposure as low in both the short-to-medium and long term. It cited delayed or less stringent climate policies that could reduce the immediate likelihood of carbon taxation.
However, under the low-warming scenario (SSP1-1.9), exposure was assessed as moderate in the short term and high over the medium and long term.
The scenario assumes an aggressive policy and regulatory environment aimed at rapid decarbonisation.
Sazgar said a carbon tax could eventually result in higher energy, compliance and value-chain costs, potentially requiring pricing adjustments, greater energy efficiency and a shift towards low-carbon technologies and sourcing strategies.
Sazgar invests in renewable energy
Sazgar said it is focusing on improving energy efficiency and transitioning towards renewable energy sources to reduce its carbon intensity.
The company also plans to support these efforts through cleaner production technologies, stronger emissions monitoring systems and carbon offset mechanisms.
As part of its proactive response, Sazgar initiated renewable energy generation ahead of any formal carbon tax framework for Pakistan’s automotive industry.
No material impact reported in FY2025-26
Sazgar said it did not experience any material operational or financial impact from carbon taxation or levies during FY2025-26, as Pakistan had not implemented a formal nationwide carbon tax framework for the automotive industry.
However, the company disclosed a financial effect associated with its renewable energy initiative in its audited financial statements for the year ended June 30, 2026.
The solar power project, recorded under Property, Plant & Equipment in the Statement of Financial Position, amounted to Rs323.72 million.
Future financial impact possible
Looking ahead, Sazgar said the potential introduction of a carbon tax by the Government of Pakistan could have financial implications over the long term.
The anticipated impact could arise through higher energy prices, additional compliance requirements and broader effects across the company’s value chain.
The company’s assessment indicates that while carbon taxation has not materially affected its financial performance so far, tighter climate policies could increase the financial significance of the risk over time.