Karachi: The Institute of Cost and Management Accountants of Pakistan (ICMAP) has proposed the imposition of a Carbon and Pollution Levy on large industrial units as part of its tax reform recommendations for the Federal Budget 2026–27.
In its budget proposals submitted to the Ministry of Finance, ICMAP recommended the introduction of a Progressive Carbon and Pollution Levy (PCPL) to address the growing environmental and economic damage caused by industrial pollution in Pakistan.
According to the institute, pollution generated by large-scale industries is placing a heavy burden on public health, infrastructure, and national productivity, while these hidden costs remain largely unaccounted for in the existing tax system. ICMAP stressed that the proposed levy would help internalize these environmental costs and push industries toward cleaner operations.
Under the proposed framework, the levy would be assessed on the basis of facility-level emissions and pollutant intensity, ensuring that industries with higher emissions bear a proportionately larger tax burden. This model is intended to encourage industrial units to adopt energy-efficient technologies, cleaner fuels, and environmentally responsible production practices.
ICMAP further recommended that the revenue generated through the carbon and pollution levy should be specifically earmarked for environmental protection projects, pollution control systems, climate resilience efforts, and public health initiatives. The institute said such a mechanism would not only improve environmental governance but also support Pakistan’s broader sustainable development agenda.
The proposal is also in line with Pakistan’s international climate commitments, as the country continues to face increasing pressure to adopt stronger environmental and carbon management policies. ICMAP noted that the tax could play a meaningful role in promoting green industrial transformation while helping businesses align with evolving global environmental compliance standards.
Among the major benefits highlighted by the institute are the promotion of low-carbon technologies, improved air quality, stronger incentives for industrial innovation, and enhanced environmental accountability across high-polluting sectors. ICMAP estimated that the proposed levy could contribute to an emissions reduction of 10 to 20 percent in heavily polluting industries over time.
The institute also pointed out that the proposed carbon and pollution levy could create a stable and sustainable revenue stream for environmental programs, while encouraging Pakistan’s industrial sector to modernize and remain competitive in an increasingly climate-conscious global economy.
If adopted in the Budget 2026–27, the proposal would mark a significant shift in Pakistan’s taxation policy by integrating environmental sustainability with fiscal reform, potentially opening the door for broader green taxation measures in the future.
