Fuel taxes ‘are far too low to drive shift to cleaner options’

The OECD claims 70% of energy-related carbon dioxide emissions from advanced and emerging economies are completely untaxed

Big Zero Report 2022

Fuel taxes across much of the world are far too low to drive shift to cleaner options.

That’s the verdict from the OECD, which says despite taxes being an effective mechanism to stop harmful behaviours, 70% of energy-related carbon dioxide emissions from advanced and emerging economies go completely untaxed.

The organisation notes taxes are not only an effective option to reduce the risks and impacts of climate change and air pollution but adds they would also generate significant income that could be used for purposes such as easing the process of decarbonisation for vulnerable households.

Across 44 countries studied, 97% of energy-related carbon dioxide emissions, not including road transport, are taxed far less than the amount that would reflect and offset the real damage they inflict upon the environment.

The report notes road fuels still rarely reflect the cost of environmental harm despite being set at comparatively high levels, while taxes on fuels such as coal are almost non-existent, even though it makes up almost half of carbon dioxide emissions from energy.

It adds coal taxes often exceed those placed upon natural gas, which is a cleaner fuel, and highlights how aviation being untaxed means frequent flyers and cargo firms avoid paying their “fair share”.

The report claims only Denmark, the Netherlands, Norway and Switzerland tax fuels not in the road-sector at a level above €30 (£26.4) per tonne of carbon dioxide, a figure which the OECD notes is considered a low-end estimate of the true cost of producing emissions.

OECD Secretary-General Angel Gurría said: “We know we need to burn less fossil fuel but when taxes on the most polluting fuels are zero or close to zero, there is little incentive to change.

“Energy taxes are not the sole solution but we can’t curb climate change without them. They should be applied fairly and used to improve well-being and ease the energy transition for vulnerable groups.”

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