For years, Pakistan has told the world that it is among the countries most vulnerable to climate change.
Pakistani negotiators, policymakers and diplomats have repeatedly argued that climate finance is not reaching the last mile, that adaptation needs remain severely underfunded and that countries like Pakistan deserve greater international support because they contribute little to global emissions but suffer disproportionately from climate impacts.
These arguments are legitimate as Pakistan has endured devastating floods, recurring heatwaves, droughts, glacier melt, water stress, declining agricultural productivity and growing climate-induced economic losses.
Yet the federal budget for FY2026-27 raises an uncomfortable question: if climate finance is not reaching communities from abroad, why is climate finance generated at home not reaching them either?
In Budget 2026-27, the government expects to collect approximately Rs2.026trillion through climate- and green-linked revenues and levies during FY2026-27.
These include Rs1.676tr from the Petroleum Levy, Rs50billion from the newly introduced Climate Support Levy, Rs22.5bn from the EV Adoption Levy, Rs70.8bn from the Gas Development Surcharge, Rs140.5bn from oil and gas royalties and other climate- and environment-linked revenue streams.
At first glance, this appears to indicate that climate considerations are finally entering Pakistan’s fiscal architecture. But a closer look reveals a different reality.
Direct climate-tagged allocations excluding subsidies amount to only Rs214bn. Within this envelope, adaptation allocations amount to Rs70.5bn, representing a decline of approximately 17.5% compared to the previous fiscal year.
Mitigation allocations have fallen even more sharply to Rs124.1bn, a 79.4% reduction from FY2025-26. Support for areas such as climate governance, policy development, capacity building, data systems and research has declined by around 30.7%, falling to Rs19.5bn.
The PSDP allocation for the Ministry of Climate Change and Environmental Coordination has fallen from approximately Rs14.3bn in FY2021-22 to only Rs2.48bn in FY2026-27 — an 83% decline in just five years. The Ministry’s share of the federal PSDP now stands at roughly 0.25%.
At the same time, the environment budget has been reduced from Rs5.952bn to Rs5.032bn. This reduction comes amid worsening air pollution, waste management challenges, deteriorating water quality, ecosystem degradation, and accelerating climate impacts.
Disaster allocations, however, have reached Rs116.2bn, a 132% increase over the previous year. This shift exposes the underlying philosophy of Pakistan’s climate financing approach: prioritising spending after disasters rather than investing sufficiently before they occur.
For years, experts have urged governments to treat climate as a business case. Investments in resilience generate economic returns by preventing future losses. A rupee invested in adaptation today can save multiple rupees in disaster recovery tomorrow.
Pakistan seems to have adopted only half of this logic. Rather, the government has misinterpreted the logic by treating the word ‘business’ as something linked to filling up the national treasury. While the government has become increasingly effective at generating climate-linked revenues, it has not matched this with comparable climate-linked investments.
As per the levies and taxes tagged as green or under climate in Budget 2026-27, for every Rs100 collected through climate- and green-linked fiscal measures, only around Rs10.6 is allocated toward climate-tagged action, and the remaining Rs89.4 enters the general treasury.
On average, each Pakistani contributes roughly Rs8,190 annually through climate-linked taxes, or on average a family of four contributes approximately Rs33,560 per year to the government as direct climate tax. Yet direct climate spending translates into only Rs890 per person per year.
The Economic Survey 2025-26 acknowledges climate change as a macroeconomic risk. Climate-related disasters caused approximately Rs822bn in losses during 2025 alone, affecting over four million people.
More than four million people were affected or displaced, and Pakistan experienced its second-warmest year in 65 years. Heat stress intensified, water scarcity worsened, glaciers continued retreating, and extreme weather increasingly disrupted economic activity.
Yet despite recognising climate as a macroeconomic challenge, the survey fails to integrate climate analysis across the broader economy. There is little discussion of how climate change is affecting crop yields, agricultural productivity, irrigation requirements, groundwater depletion, food inflation, urban flooding, labour productivity, health expenditures or water availability.
Climate remains largely confined to a dedicated chapter rather than being treated as a cross-cutting risk affecting virtually every sector of the economy.
This represents a missed opportunity. Perhaps the most striking omission concerns climate budget tagging itself. Pakistan has often highlighted the introduction of Climate Budget Tagging as a major reform under the IMF Resilience and Sustainability Fund, and has climate-tagged 5,000 cost centres last year.
This is not a minor administrative achievement but provides a potentially powerful mechanism to track where climate-related spending is occurring.
But the obvious next question is: what outcomes did this spending produce? If 5,000 cost centres were tagged, then measuring outcomes should have become easier, not harder.
The Economic Survey could have reported how many communities became more flood-resilient, how much degraded land was restored, how many households gained access to renewable energy, how much irrigation efficiency improved, how many schools and hospitals became climate-resilient, how much groundwater recharge capacity increased, or how many vulnerable populations benefited from adaptation investments.
Instead, the Economic Survey largely reports spending classifications while remaining silent on outcomes. The climate budget tagging risks becoming a bookkeeping exercise if it cannot demonstrate measurable gains in resilience on the ground.
The Climate Support Levy further illustrates this challenge. While expected to raise Rs50bn in FY2026-2027, there is no guaranteed mechanism ensuring these funds support climate action.
At least 50% of Climate Support Levy revenues should be earmarked for adaptation and resilience, with carbon-related revenues supporting mitigation investments. But without an operational Pakistan Climate Change Fund, climate levies cannot be effectively ring-fenced, tracked, or linked to outcomes.
This gap also weakens Pakistan’s international climate diplomacy. Credibility depends not only on vulnerability but also on demonstrated domestic commitment. Pakistan’s climate risks and revenues are rising, but climate protection is not keeping pace. Without transparent financing, measurable outcomes, and institutional accountability, the country risks taxing climate vulnerability without reducing it.
The consequences extend beyond domestic policy. Pakistan’s international climate diplomacy increasingly depends on demonstrating that it is one of the most climate-vulnerable countries, willing to invest in resilience alongside demanding support from others.
Unfortunately, Pakistan has also been largely absent from several key climate negotiations and technical discussions recently, including important deliberations taking place during the Bonn climate talks.
As Pakistan prepares for future negotiations and eventually COP31, its climate finance narrative faces growing scrutiny. When Pakistan argues that global climate finance is insufficient, the question from international partners becomes unavoidable: what happened to the climate finance generated domestically? If climate-linked revenues collected domestically are not transparently reinvested in climate action, Pakistan’s credibility suffers. The country’s case for additional international finance becomes weaker, not stronger.
The contradiction becomes even more significant when viewed against Pakistan’s climate finance requirements. Various assessments by development partners, multilateral institutions and government planning exercises estimate that Pakistan will require roughly $300-350bn in climate-related investments by 2030-2050 to meet its adaptation, resilience, mitigation and development objectives.
These investments are needed for water infrastructure, climate-resilient agriculture, disaster risk reduction, renewable energy, resilient transport systems, urban adaptation, ecosystem restoration, glacier monitoring and climate-proofing of public infrastructure.
Pakistan’s Nationally Determined Contributions (NDCs 3.0) contain ambitious commitments on emissions reduction, renewable energy, electric mobility, adaptation planning, nature-based solutions and climate-resilient development.
However, commitments alone do not create resilience; financing does. Every NDC target depends on whether sufficient resources are mobilised and invested on the ground.
The challenge is becoming more urgent because climate vulnerability can no longer be viewed in isolation from broader regional and geopolitical risks. Pakistan is situated in one of the world’s most climate-sensitive and conflict-prone regions.
Last year’s tensions with India highlighted the strategic importance of ecological resources, particularly water, which is increasingly emerging as both an environmental and national security concern.
Similarly, the recent conflict involving Iran exposed another layer of vulnerability: energy insecurity. Disruptions in regional energy markets quickly translate into higher fuel prices, inflationary pressures and fiscal stress for countries such as Pakistan that remain dependent on imported fossil fuels.
Climate resilience is therefore no longer merely about floods and droughts; it is increasingly linked to economic stability, energy security, food security, water governance and national resilience.
Viewed through this lens, climate investment should be treated not as environmental expenditure but as an investment in economic security and national preparedness. Yet the FY2026-27 budget continues to prioritise revenue collection over resilience creation.
Climate risks and climate revenues are rising, but climate protection is not keeping pace. Unless climate revenues are connected to climate outcomes through transparent financing, measurable results and institutional accountability, Pakistan risks taxing climate vulnerability without reducing it.
The writer is an environmental scientist and leads the ecological sustainability and circular economy programme at the Sustainable Development Policy Institute (SDPI), Islamabad.
Disclaimer: The viewpoints expressed in this piece are the writer’s own and don’t necessarily reflect Geo.tv’s editorial policy.
Originally published in The News
2026-06-14 09:46:00
