Page 84 - CMA Journal (May-June 2025)

ECONOMY O TH ER F EATURES

WATCH

By ICMA Research and Publica ons Department

Advancing Pakistan’s Climate Support Levy:

Lessons from Global Carbon Pricing Models

Carbon Tax vs. Climate Support Levy emphasize its broader developmental purpose. The levy
imposes a charge of Rs. 2.50 per liter on petroleum
A carbon tax is a straightforward economic instrument products such as petrol, diesel, and furnace oil. It aims to
that imposes a direct tax on carbon emissions, usually discourage the excessive use of fossil fuels and
levied on fossil fuel producers or large-scale emitters. The simultaneously generate dedicated revenue for climate
tax is calculated based on the carbon content of fuels or resilience projects, including green infrastructure,
the actual volume of greenhouse gas (GHG) emissions, renewable energy initiatives, and environmental
thus creating a financial disincentive for pollution. Its adaptation programs. By internalizing the environmental
core principle is “polluter pays,” encouraging industries to cost of carbon emissions, the Climate Support Levy marks
shift toward cleaner technologies to avoid higher costs. a significant step toward integrating climate
responsibility into the national fiscal policy.
In contrast, a Climate Support Levy—sometimes
referred to as a carbon levy in broader discussions—is New Energy Vehicles (NEV) Adoption Levy
not always linked directly to emission volumes. Instead, it
is a broader fiscal mechanism imposed on The New Energy Vehicles Adoption Levy Act of 2025 is
carbon-intensive goods or services, often with the also part of the Finance Bill 2025–26—another
explicit goal of financing climate mitigation, adaptation, forward-looking initiative aimed at transforming
or energy transition programs. It may be collected at Pakistan’s transportation sector. The Act imposes a 1% to
points of sale, import, or production and funneled into 3% levy on all Internal Combustion Engine (ICE) vehicles,
green infrastructure, renewable energy subsidies, climate whether imported or locally assembled, while offering
resilience projects, or social safety nets for vulnerable exemptions for electric vehicles (EVs), hybrids with at
populations affected by decarbonization. least 50 km electric range, and hydrogen fuel cell
vehicles. The levy is collected at the import
Feature Carbon Tax Climate Support Levy or manufacturing stage and is intended to
fund the development of EV infrastructure,
Basis Volume of emissions Price or type of carbon-
or fuel carbon content intensive product/service support the transition to clean transport,
and reduce air pollution. By creating
Purpose Discourage emissions Raise funds for climate- financial disincentives for traditional
related initiatives vehicles and channeling funds into
sustainable alternatives, the NEV Adoption
Direct Link to Yes Not necessarily Levy supports Pakistan’s broader climate
Emissions
commitments and green growth strategy.
Use of Revenue General revenue Typically earmarked for
or earmarked climate action Which Countries Have
Implemented the Carbon Tax?

Climate Support Levy in Finance Act 2025 Singapore

The Climate Support Levy, introduced in Pakistan’s Singapore’s carbon tax offers a
Finance Bill 2025–26 and effective from July 1, 2025, is a structured and phased model
fiscal measure designed to address environmental and for implementing carbon
climate challenges through economic means. Initially pricing in an advanced,
labeled a carbon levy, the term was later changed to trade-exposed economy.

82 ICMA’s Chartered Management Accountant, May-June 2025