Carbon levy, water pricing & the green tax puzzle
The very icons of our green aspirations — solar carports, residential panels — were left in ruins, with estimates suggesting damage worth tens of millions of rupees. Climate change had arrived. Not through a long, boring UN report, but via a dented Honda Civic and a broken inverter.
Events like this are no longer flukes. From unprecedented monsoon floods to suffocating heatwaves, from melting glaciers to disappearing groundwater tables, Pakistan's weather patterns are becoming more erratic — and more expensive. In this climate reality, the conversation has finally shifted from 'if' to 'how much longer can we afford to ignore it?'
Enter the IMF — and with it, a set of fiscal policies that attempt to put a price on pollution and depletion. The upcoming carbon levy, expected to be imposed at Rs 3-5 per litre on petroleum products and coal starting July 2025, is part of Pakistan's commitment under the Resilience and Sustainability Facility. The stated aim: raise revenue to fund climate adaptation. But more than that, it's a wake-up call — a signal that business-as-usual now carries a cost.
That cost, however, is not just carbon. If there's one crisis that looms even larger, it's water.
Let's call it what it is: Pakistan is on the brink of a water collapse. According to the IMF and the PCRWR (Pakistan Council of Research in Water Resources), we may become a water-scarce country as early as this year — 2025. Per capita availability has dropped below 1,000 cubic meters, the international threshold for scarcity. By comparison, India hovers around 1,500. We're not just inching toward the cliff. We're over the edge and falling.
And yet, what do we do with the little water we have?
We pump it. Relentlessly. Without meters. Without permits. Without the faintest idea of how fast the aquifers are declining. In Lahore, the water table has dropped over 50 feet (15.24 m) in just the last 15 years. In parts of Karachi and Hyderabad, underground water has turned saline. And still, housing societies, beverage plants, and textile mills continue to extract it like it's a divine inheritance.
We waste it. Our urban water infrastructure leaks over 40 percent of supplied water before it even reaches the tap. Agriculture—our largest consumer of water—continues to flood-irrigate fields as if it were 1890. Sugarcane and rice dominate crop cycles in arid zones. In cities, car washes, fountains, and lawns thrive, while groundwater shrinks and rivers run dry.
We ignore it. Pakistan gets about 145 million acre-feet (MAF) of water annually. Of this, we manage to store just 13 percent — mostly in a few large dams built decades ago. The rest? It flows straight into the Arabian Sea. If ever there was a definition of short-sightedness, it's this: a water-insecure country letting most of its rainwater drain away.
This is the context in which water pricing is being discussed—not as a revenue tactic, but as a matter of survival. We must begin drafting legislation to regulate and price groundwater extraction, starting with industrial and commercial users. Without commenting on what is in the works with the provincial governments the intention must be clear: stop treating water as a free resource and start managing it as a strategic asset.
Naturally, many in the business community are bracing for impact. Energy prices are already high. Inflation is running wild. Tax compliance is patchy. And now, new levies?
But let's take a step back.
First, it's important to separate pain from panic. The proposed carbon levy is modest by global standards. Even at Rs5 per litre, it remains lower than many environmental taxes in developing economies. And it doesn't apply to small producers or agriculture — at least not yet.
Second, water pricing, in its initial phase, targets the largest extractors — industries pumping tens of thousands of gallons daily. These aren't small businesses, rather they are large-scale operations that can afford a few paisas per litre to secure their future access.
And third—and this is crucial—pricing isn't punishment. It's a pathway to reform.
By making overconsumption expensive, you incentivize efficiency. You nudge businesses to recycle wastewater, invest in closed-loop systems, adopt water-saving tech, and even change sourcing strategies. And yes, examples of this already exist in Pakistan. A major Lahore-based textile exporter recently installed a zero-liquid-discharge system, reducing its water consumption by over 70% and earning 'preferred supplier' status from European buyers. Did it cost them upfront? Sure. Did it pay off? Absolutely.
Globally, this shift is already happening. Green taxation is being paired with green finance. Carbon pricing mechanisms, ESG reporting requirements, and climate-related disclosures are becoming standard in boardrooms, not just think tanks. And the businesses that lead—not lag—are the ones getting the contracts, the capital, and the credibility.
Pakistan, for all its flaws, has a chance to leapfrog. With a young workforce, a growing green energy sector, and a private sector that's more agile than it gets credit for, we can build a low-carbon, water-secure economic model. But that requires courage—from policymakers and from the business class.
The government, for its part, must do three things to avoid turning good policy into bad politics.
One, ringfence the revenue. Use funds from the carbon levy and water pricing to actually build resilience—solar parks, urban water tanks, canal lining, and rainwater harvesting. If businesses know where their money is going, they're more likely to pay without protest.
Two, communicate predictability. No more surprise SROs or last-minute reversals. Create a 5-year roadmap with clear escalation paths and sunset clauses. Let industries plan, budget, and adapt.
Three, reward the early movers. Offer tax credits, soft loans, and fast-tracked permits for companies that invest in clean energy, green tech, or water conservation. Show that responsibility isn't just a burden—it's a competitive edge.
As for the private sector: adapt or perish. We can't keep importing used Japanese cars, exporting low-value yarn, running on diesel, and pumping free groundwater forever. The world is changing—and fast. Europe's CBAM will tax the carbon in our exports. Customers care about water footprints. Investors track ESG scores. Whether we like it or not, sustainability has become bankable.
The carbon levy and water pricing are not perfect tools. But they are necessary signals. And if we implement them with fairness and foresight, they can help shift us from short-term survival to long-term strategy.
In the words of Benjamin Franklin, 'When the well is dry, we know the worth of water.' In Pakistan, the well isn't just drying—it's screaming. And ignoring that scream could cost us more than any tax ever will.
Copyright Business Recorder, 2025
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Business Recorder
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Rain reimagined: could monsoons be the answer to Pakistan's water problems?
In Pakistan, where flooding devastates some regions while drought cripples others, rainwater harvesting is an uptapped lifeline that could turn the monsoon season from a nuisance to a resource. Rainwater harvesting is the collection and storage of rain for reuse before it drains away. From rooftop catchment tanks in homes to large underground reservoirs in communities and farms, this system allows water to be stored for irrigation, washing, livestock, and even safe drinking with basic filtration. In cities like Karachi, Lahore, and Islamabad, flash floods during monsoon seasons cause chaos, yet the same water could be stored to recharge groundwater or provide months of clean utility water. In rural Pakistan, especially in arid zones like Tharparkar, Cholistan, and Balochistan, where rainfall is rare but intense, harvesting systems could mean the difference between survival and starvation. These areas desperately need community based water tanks, dug wells, and natural catchment restoration all of which can be done with low cost, local materials. According to the Pakistan Council of Research in Water Resources (PCRWR), more than 29 million acre-feet (MAF) of rainwater goes unused annually. That's enough to meet the drinking and household needs of every Pakistani for a year yet it simply washes away. Dams dry up, groundwater drops, and climate change tightens its grip. What's more, cities draw groundwater at unsustainable rates, causing the water table to fall dangerously low. In parts of Punjab and Sindh, groundwater depletion has already reached crisis levels, threatening both drinking water and food production. As Pakistan faces yet another year of unpredictable rains, parched fields, and shrinking water supplies, a centuries old solution is knocking from the sky. Rainwater harvesting - once a common practice in rural communities that has faded into obscurity amid urban expansion and mismanaged water systems - needs to be revived. 'It's not rocket science' 'Pakistan is now ranked among the top 10 countries most vulnerable to water stress. With an alarming per capita water availability of less than 900 cubic meters, we've plunged below the scarcity threshold. And yet, every year, billions of liters of precious rainwater are wasted flowing off rooftops, flooding streets, or evaporating unused,' associate professor at Sindh Agricultural University Dr Aasia Akbar Panhwar said. She said rainwater harvesting 'isn't rocket science'. Countries like India and Australia have already made it part of their national water management. Dr Panhwar called for mandatory rainwater harvesting in all new buildings and housing schemes; community tanks and recharge pits in water stressed areas; training and awareness programmes for farmers, builders, and local governments; integration of rainwater harvesting in school and college curricula; and government subsidies and technical support to promote adoption. 'As climate change worsens and rainfall becomes more erratic, we must act now or face an even drier, more divided future.' 'Rainwater harvesting offers a rare win-win situation as it reduces flood risk, replenishes aquifers, supports agriculture, and strengthens water independence. Let's stop watching the rain as a passing storm and start seeing it as a precious gift.' she said. Assistant Professor Dr Tanveer Ahmed Gadhi - who works at the US Pakistan Center for Advanced Studies in Water at Mehran University of Engineering & Technology, Jamshoro - said Pakistan receives an average of 137 billion cubic meters of rainfall annually, equivalent to 111 MAF. Yet, due to inadequate infrastructure, poor urban planning, and a lack of strategic catchment systems, over 60–70% of this goes unutilized, either running off into drains or evaporating. 'If even 30% of annual rainfall were effectively harvested and stored through rooftop systems, urban recharge schemes, and small check dams, Pakistan could potentially capture around 33–35 MAF/year, or over 90 billion liters per day - that is nearly four times the nation's drinking water requirement, and about 15% of total agricultural water use, a meaningful cushion for drought-prone periods,' he said. He said for urban areas, rooftop rainwater harvesting alone holds significant promise. In cities like Karachi, Lahore, Islamabad, and Quetta, annual rainfall ranges from 150 mm to 500 mm. A single 1,000 sq. ft. rooftop can collect up to 50,000 liters/year, which, when scaled across urban housing units, could offset municipal water stress significantly. Similarly, rain-fed (barani) areas of Punjab and Balochistan could enhance agricultural resilience by using localized harvesting and storage systems for supplemental irrigation. On top of that, groundwater recharge, now critically low in urban centers, can be dramatically improved by channeling rainwater through percolation pits and aquifer injection wells. In parts of Islamabad and Lahore, pilot recharge systems have already shown promising results in restoring shallow aquifers after monsoons. 'From scarcity to sustainability' Despite the potential, rainwater harvesting in Pakistan remains underutilized due to weak policy support, lack of public awareness, and fragmented institutional ownership. While countries like India have legally mandated rooftop harvesting in many states, Pakistan's uptake is still mostly limited to pilot projects and donor-funded initiatives. 'Harnessing even a fraction of the annual rainfall through systematic harvesting could transform Pakistan's water outlook from scarcity to sustainability. It is not a question of availability, but a question of will, planning, and action,' Dr Gadhi said. According to the World Bank and FAO studies and reports, Pakistan requires an estimated 922 billion liters of water per day, equivalent to 236 MAF annually, to meet its national needs across drinking, domestic use, livestock, and agriculture. However, the breakdown of this demand reveals a striking imbalance in how the country allocates its water. Despite a population exceeding 241 million, the combined requirement for safe drinking water and basic household needs accounts for only 36 billion liters per day, less than 4% of total usage. This includes around 12 billion liters for drinking and hygiene (at 50 liters per person/day) and 24 billion liters for broader household use. In stark contrast, agriculture alone consumes nearly 880 billion liters daily, making up over 93% of Pakistan's total water use. This is largely due to inefficient irrigation methods and cultivation of water-intensive crops like rice and sugarcane. With nearly 200 million animals, the livestock sector adds another 6 billion liters daily to the national demand. These numbers underscore a systemic misalignment, while safe drinking water needs are modest, they remain unmet in many regions, often due to poor infrastructure and contamination. The data suggests that Pakistan's water crisis is not purely about scarcity; it's fundamentally about governance, efficiency, and misplaced priorities. Without urgent policy shifts towards equitable distribution, sustainable irrigation, and investment in treatment systems, the country risks deepening its water insecurity even with more than enough water on paper.
Express Tribune
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Flood fears mount in twin cities
The monsoon flood season is set to reach its critical phase in the twin cities of Rawalpindi and Islamabad starting today (Wednesday). Historical data spanning the last 71 years reveals that all major floods in the region have occurred between July 17 and July 27. The first 15 days of the traditional Sawan season, beginning July 16, are considered the most perilous in terms of flood risk. By the start of August, the likelihood of catastrophic flooding typically declines. Between July 16 and July 31, every intense downpour poses a serious threat of urban flooding in low-lying neighborhoods, streets, and roadways. With the onset of Sawan, residents living along the 22-kilometer-long Nullah Leh and the banks of 15 rain-fed tributaries — winding through the city like serpents — have already begun precautionary evacuations. Residents from approximately 19 vulnerable communities have either relocated entirely or transferred only their valuable belongings to safer locations, leaving behind basic necessities. When water levels rise, these families move swiftly to higher ground and return as soon as the water subsides — often within a few hours — to begin cleaning and restoring their homes. Historically, Nullah Leh was a pristine stream fed by natural springs and rainwater flowing from the Margalla Hills of Islamabad. It entered Rawalpindi near New Katarian and eventually emptied into the River Soan. The area was originally settled by the Aryan community, drawn by the clean water and dense forests. To this day, their legacy remains in names such as Arya Mohalla, located near Liaquat Bagh Chowk. Until 1925, the stream's waters were crystal clear — used for ablution, drinking, washing clothes, and Hindu religious rituals. Cremated remains were also immersed in its waters. According to local elders, the stream was once home to fish, which the Aryans would catch. However, following the Partition in 1947, this once-pristine waterway began to deteriorate. With Rawalpindi's industrialization and the rapid development of Islamabad as the federal capital, the stream steadily turned into a polluted drain. Today, Nullah Lai and its tributaries function as open sewage channels, overflowing and causing destruction with each monsoon season. Nullah Lai spans 22 kilometers, with a width ranging from 500 to 1,000 feet. Of its total length, 11 kilometers run through urban Rawalpindi, with the remainder passing through cantonment areas. The deadliest flood in its history occurred on July 23, 2001, when surging waters claimed 65 lives and 300 domestic animals. Commercial sectors suffered losses estimated at Rs. 7 billion. Many traders who were millionaires the day before found themselves destitute overnight — and some families have yet to recover, even 24 years later. The first recorded flood in Nullah Lai occurred in 1967 during General Ayub Khan's era. The second followed in 1969 under General Yahya Khan, resulting in three fatalities. The third struck in 1972 during Prime Minister Zulfikar Ali Bhutto's government, taking 10 lives. Further floods occurred in 1975, 1982, and 1986, after which monsoon flooding became a nearly annual crisis.
Express Tribune
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Forecast rain nears, drains stay choked
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