ISLAMABAD: The Finance Division has launched a new form, Form-III C, as part of its climate-focused budgeting efforts for the 2025–26 fiscal year. This initiative builds on previous steps to integrate climate considerations into Pakistan’s federal budget, now expanding to include subsidies, a major area of public expenditure.
Since fiscal year 2023–24, the government has classified federal spending into three climate-related categories: adaptation, mitigation, and transition. Initially applied to civil government operations and development programs, the latest revision extends climate tagging to grants and subsidies.
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Subsidies, which provide financial support to consumers or producers by offsetting costs or supplementing income, will now be assessed and tagged for their relevance to climate goals. Principal Accounting Officers are required to submit the completed Form-III C by May 30, 2025, with technical guidance from the Finance Division to ensure accurate and consistent reporting.
The form requires detailed input from departments, including the identification of cost centers, sector classification (such as energy, transport, agriculture, and infrastructure), and descriptions of subsidy types. These subsidies will be categorized based on their climate impact into adaptation or mitigation efforts.
Adaptation subsidies include support for agriculture research, crop insurance, climate-resilient infrastructure, and energy grids, while mitigation subsidies cover clean energy technologies, energy efficiency, hydropower, renewables, and sustainable transport systems.
Subsidies are further classified into five categories reflecting their climate impact: Category A (directly favourable), Category B (indirectly favourable), Category C (neutral or unassessed), Category D (mixed effects), and Category E (potentially unfavourable). For example, subsidies encouraging electric vehicles fall under favorable categories, while those increasing pollution are considered potentially unfavourable.
This structured approach aims to enhance transparency, quantify climate-related public spending more effectively, and align fiscal policies with Pakistan’s climate commitments under the IMF’s Extended Fund Facility.
The deadline for Form-III C submission is May 30, 2025.
