Energy taxes are too low to combat climate change, OECD says

Courtney Goldsmith
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Taxes on energy use are too low, the OECD argues (Source: Getty)

Energy taxes in developed economies are "well below" where they should be to reflect climate costs, the Organisation for Economic Co-operation and Development (OECD) said in a report today.

"Energy taxes are failing to attain their potential contribution to reaching economic, social and environmental policy goals," said Angel Gurria, OECD secretary general.

"Policymakers continue to miss out on making full use of these effective instruments to reach climate goals."

Read more: A global carbon tax would be an incentive for businesses

Governments can use taxes on energy use - like fuel duties, carbon taxes and excise duties - to make consumers pay for the costs of pollution.

The analysis of taxes in 42 OECD and G20 economies between 2012 and 2015 suggested nearly all tax rates were too low from an environmental point of view.

The economies examined represent about 80 per cent of the global energy use and carbon dioxide (CO2) emissions from energy use.

“A bird’s eye view of effective taxes per tonne of CO2 across all countries reveals that there is hardly any change in the tax rates on emissions outside the road transport sector,” the report said.

“Taxes continue to be poorly aligned with environmental and climate costs of energy use, across all countries."

In the road transport sector, 97 per cent of emissions are taxed, and 50 per cent were taxed above climate costs in 2015, up from 46 per cent in 2012.

However, in the non-road sectors, which collectively account for 95 per cent of carbon emissions from energy use, 81 per cent of emissions were untaxed.

The research found coal, which accounts for almost half of carbon emissions in the 42 countries, was often untaxed, while taxes on oil were relatively high.

Read more: Climate Progress Dashboard points to 4.1°C temperature rise

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