Carbon Levy on Petroleum Products Likely; Fears of Inflation Surge

Islamabad: The government is expected to impose a carbon levy on petroleum products in the upcoming fiscal year 2025–26, raising concerns over a potential spike in fuel prices and overall inflation.
According to official sources, a carbon levy of Rs. 2.5 per liter is likely to be introduced in the federal budget for 2025–26. In the following year, the levy is expected to be doubled to Rs. 5 per liter.
Estimates suggest that the carbon levy could generate up to Rs. 45 billion in revenue in FY2025–26, with potential for the income to double by FY2026–27. The additional revenue will contribute to the government’s green budgeting initiative.
Sources indicate that the carbon levy will be imposed on petrol and diesel in conjunction with the existing Petroleum Development Levy (PDL), while kerosene oil and light diesel oil will remain exempt.
No separate legislation will be required for the carbon levy, as it will be integrated into the existing budget framework. However, the move is expected to put upward pressure on fuel prices, further straining consumers already burdened by inflation.