Budget 2025-26 Proposes Rs. 2.5 Per Liter Carbon Tax on Fuel

Jawad

10 Jun 2025

184

Budget 2025-26 Proposes Rs. 2.5 Per Liter Carbon Tax on Fuel

As Pakistan prepares to unveil its Budget 2025-26, early indications from the finance ministry suggest major reforms are on the horizon—particularly in the energy and transport sectors. With environmental concerns taking center stage, the government is introducing new measures that could result in a noticeable fuel price hike and a greater focus on green alternatives. Among the most impactful proposals is the new carbon tax on fuel, which will directly affect petrol and diesel costs across the country.

Rs 2.5/L Carbon Levy on Fuel

A significant highlight of the upcoming Pakistan fuel budget is the introduction of a carbon levy in Pakistan on all fossil fuels. As part of the budget fuel policy, a fuel carbon charge of Rs 2.5 fuel per liter will be applied to petrol, high-speed diesel, and furnace oil starting from the 2025-26 fiscal year. By 2026-27, this 2025 fuel tax is expected to rise to Rs. 5 per liter. The revenue collected through this tax is intended to support environmental initiatives aimed at reducing carbon emissions.

This petrol tax 2025 policy underscores a national effort to reduce reliance on traditional fuels and accelerate the shift toward renewable energy sources. While the short-term effect may be a spike in fuel prices, the long-term goal is to promote cleaner energy and curb pollution.

New Push for Electric Vehicles

Alongside the fuel levy, Pakistan is working on a comprehensive budget fuel policy to support electric mobility. The forthcoming New Energy Vehicle Policy aims to incentivize the use of electric two- and three-wheelers, encouraging consumers to move away from conventional petrol and diesel-powered vehicles.

As part of this shift, the government proposes a levy on the sale and import of internal combustion engine vehicles, with rates dependent on engine size. This move is aligned with broader environmental goals and aims to lessen Pakistan’s dependence on imported fuel while promoting a cleaner transport system.

How This Affects Citizens

For everyday citizens, these changes could lead to tangible shifts in their daily lives:

Fuel Price Hike: Expect increased petrol and diesel prices due to the Rs. 2.5/L fuel carbon charge—budgeting for transportation costs will be more important than ever.

Electric Vehicles as a Smart Choice: As levies on fuel and conventional vehicles rise, electric vehicles may emerge as a more practical and cost-effective option.

The final shape of these measures will be known once the Budget 2025-26 is officially announced. However, it's evident that Pakistan is heading towards a greener, more sustainable future by overhauling its energy and transport policies.

Budget 202526 Carbon tax fuel Fuel price hike 2025 fuel tax Carbon levy Pakistan Rs 25 fuel Petrol tax 2025 Pakistan fuel budget Fuel carbon charge Budget fuel policy

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