Review Solar Energy Tax and Carbon Levy Policy, Align Global Financial System with Climate Realities
Allocate Carbon Levy Revenue Exclusively for Climate Projects, Make Climate Finance a Tool for Climate Resilience, Experts Urge
Islamabad (Staff Reporter): Experts have called for aligning the International Monetary Fund’s (IMF) climate programs with Pakistan’s climate priorities and renewable energy transition, while urging a review of the solar energy tax, the use of the carbon levy, and other fiscal policies. They emphasized that adapting the global financial system to reflect climate realities has become an urgent necessity. The remarks were made during the launch of a research study at the Sustainable Development Policy Institute (SDPI).
The experts noted that the Resilience and Sustainability Facility (RSF) agreement between Pakistan and the International Monetary Fund (IMF) acknowledges that climate change is no longer merely an environmental issue but has become a major economic challenge. They stressed that the IMF’s climate finance programs should be aligned with Pakistan’s climate priorities, renewable energy transition, and equitable economic reforms. They argued that while the existing financial framework claims to promote climate resilience, it simultaneously undermines the adoption of clean energy and the interests of low-income communities through measures such as taxes on solar energy, rising electricity tariffs, and other fiscal policies.
The joint research conducted by Dr. Asad Sayeed, Executive Director of the Collective for Social Science Research (CSSR), Karachi, and Dr. Khalid Waleed, Research Fellow at SDPI, critically examines the IMF’s US$1.4 billion Resilience and Sustainability Facility (RSF) for Pakistan and its relationship with the Extended Fund Facility (EFF).
Delivering the opening remarks, Dr. Sajid Amin Javed, Deputy Executive Director (Research) at SDPI, said the study provides an important policy review of Pakistan’s first engagement with the IMF’s Resilience and Sustainability Facility (RSF). He explained that although the government initially viewed the facility primarily as financial support to address the country’s balance of payments crisis, its implications extend to climate resilience, sustainable development, and long-term economic planning.
He added that despite the growing recognition of the economic consequences of climate change, significant reforms in the global financial system remain essential. He emphasized that the IMF’s climate programs must be integrated with broader economic reforms, noting that measures such as imposing taxes on solar energy directly contradict the promotion of renewable energy and Pakistan’s climate objectives.
Presenting the research findings, Dr. Asad Sayeed stated that Pakistan’s balance of payments crisis, climate risks, and energy transition challenges have made climate finance a critical policy issue. He observed that the study found the primary objective of the RSF to be strengthening macroeconomic stabilization programs rather than directly financing climate adaptation investments.
He further noted that the financial resources available under the facility are insufficient for a country like Pakistan, which is among the nations most vulnerable to climate change. Therefore, climate finance should not merely provide temporary financial assistance but should also address the structural causes of climate vulnerability.
Dr. Khalid Waleed, Research Fellow at SDPI, stated that increasing electricity tariffs, reducing subsidies, and imposing taxes on renewable energy place a disproportionate burden on low- and middle-income households while restricting equitable access to energy, despite Pakistan’s negligible contribution to global greenhouse gas emissions.
He also pointed out that the Ministry of Climate Change and provincial governments had limited participation in the RSF negotiations, while the social impacts of the proposed reforms were not comprehensively assessed. He recommended that revenue generated through the carbon levy should be earmarked exclusively for climate adaptation and environmental protection projects. He further called for the removal of taxes on imported solar equipment and urged the government to designate solar energy and battery storage as strategic capital sectors to accelerate Pakistan’s clean energy transition.
The study further recommends eliminating all fiscal barriers, including taxes on imported solar equipment, to promote renewable energy. It also proposes recognizing solar energy and battery storage technologies as strategic capital assets in order to accelerate the country’s transition to clean energy and strengthen Pakistan’s long-term energy security.