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, recurrent heat waves, droughts, glacial melt, water stress, declining agricultural productivity and growing climate-induced economic losses.
Still, the FY2026-27 federal budget raises an uncomfortable question: If climate finance doesn’t reach communities from abroad, why doesn’t climate finance generated at home also reach them?
In Budget 2026-27, the government expects to collect approximately Rs 2.026 trillion through climate and green-related revenues and taxes during FY2026-27.
These include Rs1,676tr from the oil tax, Rs50billion from the recently introduced Climate Support Levy, Rs22.5bn from the EV Adoption Levy, Rs70.8bn from the gas development allowance, Rs140.5bn from oil and gas royalties and other climate and environment related revenues.
At first glance, this suggests that climate considerations are finally making their way into Pakistan’s fiscal architecture. But a closer look reveals a different reality.
Direct climate-labelled allocations excluding subsidies amount to only DKK 214 billion. Rs. Within this framework, adjustment allocations amount to Rs70.5 billion, representing a decrease of approx. 17.5% compared to the previous financial year.
Remedial allocations have fallen even more sharply to Rs124.1 billion, a reduction of 79.4% from FY2025-26. Support for areas such as climate management, policy development, capacity building, data systems and research has fallen by around 30.7%, falling to 19.5 billion. Rs.
The PSDP allocation to the Ministry for Climate Change and Environmental Coordination has decreased from approximately 14.3 billion Rs. in FY2021-22 to only Rs 2.48 billion. The ministry’s share of the federal PSDP is now around 0.25%.
At the same time, the environmental budget has been reduced from DKK 5.952 billion. to 5.032 billion This reduction comes amid worsening air pollution, waste management challenges, deteriorating water quality, ecosystem degradation and accelerating climate impacts.
However, disaster allocations have reached DKK 116.2 billion. Rs., an increase of 132% over the previous year. This shift reveals the underlying philosophy behind Pakistan’s climate finance approach: prioritizing spending after disasters rather than investing adequately 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 several rupees in disaster recovery tomorrow.
Pakistan seems to have adopted only half of this logic. On the contrary, the government has misinterpreted the logic of treating the word ‘business’ as something associated with filling the national treasury. While the government has become increasingly effective in generating climate-related revenue, it has not matched this with comparable climate-related investment.
According to the levies and taxes labeled as green or under climate in the Budget 2026-2027, only about Rs 10.6 is set aside for climate labeled action for every Rs 100 collected through climate and green related fiscal measures and the remaining Rs 89.4 goes into the exchequer.
On average, each Pakistani contributes about Rs 8,190 annually through climate-related taxes, or on average, a family of four contributes approximately Rs 33,560 per year to the government as direct climate taxes. Still, direct climate expenditure translates to just Rs 890. per person per year.
The Economic Survey 2025-26 recognizes climate change as a macroeconomic risk. Climate-related disasters caused approx. Rs822 billion. in losses during 2025 alone, affecting over four million people.
More than four million people were affected or displaced, and Pakistan experienced its second hottest year in 65 years. Heat stress intensified, water scarcity worsened, glaciers continued to retreat, and extreme weather increasingly disrupted economic activity.
Despite climate being recognized as a macroeconomic challenge, the study fails to integrate climate analysis across the wider economy. There is little discussion of how climate change affects crop yields, agricultural productivity, irrigation needs, groundwater depletion, food inflation, urban flooding, labor productivity, health care costs, or water availability.
Climate remains largely confined to a dedicated chapter rather than being treated as a cross-cutting risk affecting virtually all sectors of the economy.
This represents a missed opportunity. Perhaps the most striking omission concerns the climate budget labeling itself. Pakistan has often highlighted the introduction of Climate Budget Tagging as a major reform under the IMF Resilience and Sustainability Fund, and climate tagged 5,000 cost centers last year.
This is no minor administrative achievement, but provides a potentially powerful mechanism for tracking where climate-related spending is taking place.
But the obvious next question is: what results did this spending produce? If 5,000 cost centers were tagged, then measuring results should have become easier, not harder.
The Economic Survey could have reported how many communities became more resilient to flooding, 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 benefit from adaptation investments.
Instead, the Economic Survey largely reports spending classifications while remaining silent on outcomes. Climate budget labeling risks becoming a bookkeeping exercise if it cannot demonstrate measurable gains in resilience on the ground.
The climate support tax further illustrates this challenge. Although it is expected to raise 50 billion Rs. in FY2026-2027, there is no guaranteed mechanism to ensure that these funds support climate action.
At least 50% of Climate Support Levy revenue should be earmarked for adaptation and resilience, with carbon-related revenue supporting mitigation investment. But without an operational Pakistan Climate Change Fund, climate taxes cannot be effectively delineated, tracked or linked to results.
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 increasing, but climate protection is not keeping pace. Without transparent financing, measurable results and institutional accountability, the country risks taxing climate vulnerability without reducing it.
The consequences extend beyond domestic politics. 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 talks and technical discussions of late, including important deliberations that took place during the climate talks in Bonn.
As Pakistan prepares for future negotiations and ultimately COP31, its climate finance narrative faces growing scrutiny. As Pakistan argues that global climate finance is insufficient, the question from international partners becomes inevitable: what happened to the climate finance generated domestically? If climate-related revenues collected domestically are not transparently reinvested in climate action, Pakistan’s credibility suffers. The country’s case for additional international funding is getting weaker, not stronger.
The contradiction becomes even more significant when viewed in relation to Pakistan’s climate finance requirements. Various assessments by development partners, multilateral institutions and government planning exercises estimate that Pakistan will require around 300-350 billion. USD in climate-related investments in 2030-2050 to meet its adaptation, resilience, mitigation and development goals.
These investments are needed for water infrastructure, climate resilient agriculture, disaster risk reduction, renewable energy, robust transport systems, urban adaptation, ecosystem restoration, glacier monitoring and climate proofing of public infrastructure.
Pakistan’s Nationally Determined Contribution (NDCs 3.0) contains ambitious commitments on emissions reduction, renewable energy, electric mobility, adaptation planning, nature-based solutions and climate-resilient development.
However, obligations alone do not create resilience; financing does. Any NDC goal depends on whether sufficient resources are mobilized and invested on the ground.
The challenge becomes more urgent because climate vulnerability can no longer be viewed in isolation from broader regional and geopolitical risks. Pakistan is located 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, especially water, which is increasingly emerging as both an environmental and national security concern.
Similarly, the recent conflict involving Iran revealed another layer of vulnerability: energy insecurity. Disruptions in regional energy markets quickly translate into higher fuel prices, inflationary pressures and fiscal stress for countries like Pakistan that remain dependent on imported fossil fuels.
Climate resilience is therefore no longer just about floods and droughts; it is increasingly linked to economic stability, energy security, food security, water management and national resilience.
Seen through this lens, climate investment should not be treated as environmental spending, but as an investment in economic security and national preparedness. Yet the FY2026-27 budget continues to prioritize revenue collection over building resilience.
Climate risks and climate revenues are increasing, but climate protection is not following suit. Unless climate revenues are linked to climate outcomes through transparent financing, measurable outcomes and institutional accountability, Pakistan risks taxing climate vulnerability without reducing it.
The author is an environmental researcher and heads the Ecological Sustainability and Circular Economy Program at the Sustainable Development Policy Institute (SDPI), Islamabad.
Disclaimer: The views expressed in this piece are the author’s own and do not necessarily reflect Pakinomist.tv’s editorial policy.
Originally published in The News
