OECD: Taxes on polluting energy sources ‘too low’

Taxes on polluting forms of energy are too low to curb their use and fight against climate change. That’s the suggestion from the Organisation for Economic Co-operation and Development (OECD), […]

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By Jonny Bairstow

Taxes on polluting forms of energy are too low to curb their use and fight against climate change.

That’s the suggestion from the Organisation for Economic Co-operation and Development (OECD), which says advanced economies should use taxation systems better to reduce energy use, improve energy efficiency and drive a shift toward low carbon sources of heat and electricity.

The OECD studied tax policies between 2012 and 2015 across 42 global economies, representing around four-fifths of energy use and carbon emissions worldwide.

It shows in the road transport sector, 97% of emissions are taxed and rates were above £44 per tonne of carbon dioxide produced for 47% of emissions in 2015, compared to 37% in 2012.

In non-road sectors, which account for 95% of carbon emissions from energy use, 81% of emissions were untaxed and rates were below £26.6 per tonne of carbon dioxide for 97% of emissions.

Coal, which accounted for almost half of carbon emissions from energy use in the 42 countries, is taxed at the lowest rates or fully untaxed in almost all countries.

Taxes on diesel for transport use are lower than taxes for gasoline in every country except two, although the report suggests this appears to be changing as more cities aim to cut down on nitrogen dioxide pollution in their air.

OECD Secretary-General, Angel Gurría, said: “Efforts have been made or are underway in several jurisdictions to apply the ‘polluter-pays’ principle but on the whole progress towards the more effective use of taxes to cut harmful emissions is slow and piecemeal.

“Governments should do more and better.”