Taxes on polluting fuels are too low to encourage a shift to low-carbon alternatives

fuels

(Thomas Millot, Unsplash)

This article is brought to you in association with OECD.


Taxing polluting sources of energy is an effective way to curb emissions that harm the planet and human health, and the income generated can be used to ease the low-carbon transition for vulnerable households. Yet 70% of energy-related CO2 emissions from advanced and emerging economies are entirely untaxed, offering little incentive to move to cleaner energy, according to a new OECD report.

As world leaders gather for a UN Summit on climate change amid mounting public pressure for action, a preview of Taxing Energy Use 2019 shows that for 44 countries accounting for over 80% of energy emissions, taxes on polluting sources of energy are not set anywhere near the levels needed to reduce the risks and impacts of climate change and air pollution.

Taxes on road fuel are relatively high yet rarely fully reflect the cost of environmental harm, especially with some road transport sectors offered preferential rates. Taxes on coal – which is behind almost half of CO2 emissions from energy – are zero or close to zero in most countries. Taxes are often higher on natural gas, which is cleaner. For international flights and shipping, fuel taxes are zero, meaning long-haul frequent flyers and cargo shipping firms are not paying their fair share.

“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,” said OECD Secretary-General Angel Gurría. “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.”

Across the 44 countries studied, 97% of energy-related CO2 emissions outside of road transport are taxed far below levels that would reflect damage to the environment. Only four countries (Denmark, the Netherlands, Norway and Switzerland) tax non-road energy above EUR 30/t CO2, considered a low-end estimate of the costs to the climate of carbon emissions. Several countries have even lowered energy taxes in recent years.

Adjusting taxes, along with state subsidies and investment, is vital to encourage a shift to low-carbon energy, transport, industry and agriculture. Given the difficulties of making big changes without hurting industries or communities, a new strand of OECD work shows how factoring in potential synergies and trade-offs between emission reduction goals and broader societal objectives such as better health, jobs and affordability of services can increase the incentives for swift action to cut emissions.

New OECD analysis that will be presented at next week’s UN Summit, Accelerating Climate Action: Refocusing Policies through a Well-Being Lens, says focusing on goals like clean air, healthy eating, accessibility of services and employment and inclusive fiscal reform could make it easier to introduce changes that will end up accelerating the low-carbon transition while improving lives.

Mr Gurría urged governments in July to face up to growing anger, particularly among young people, at backsliding in some countries on decarbonising economies even as emissions from energy are at an all-time high. While energy taxes stagnate, The 2019 OECD Inventory of support for fossil fuels finds that government support for fossil fuel production and use in the 44 countries studied (OECD and G20 plus Colombia) was USD 140 billion in 2017, with subsidies rising in some countries.

Taxing Energy Use 2019 says improving tax policy so it gives a fair chance to low-carbon technologies would help shift investment to greener options.

The report – which looks at three types of tax on energy (excise taxes on fuels, carbon taxes and taxes on electricity use) in areas like power and heat generation, industry and transport – says governments should ensure any tax rises resulting from tax reforms do not hurt vulnerable  households, firms or workers. Extra tax revenues can be used for social purposes such as lowering income taxes, increasing spending on infrastructure or health, or funding direct transfers to households.

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

It’s time to gang up: a personal conflict on discrepancies in the medical community

What is inclusive capitalism, and why does it matter?

Taxation: Commission refers Hungary to the Court for failing to apply the minimum EU excise duty on cigarettes

The EU Commission predicts a decimated growth in the next years

‘Massive and protracted’ humanitarian crisis in DR Congo can be ‘beaten back’ if donors step up

Fighting against the Public Health System dismantling means guaranteeing assistance to all

How trade wars pose a threat to the global economy

EU-US Privacy Shield data exchange deal: US must comply by 1 September, say MEPs

Environmentalists have removed nearly 40 tonnes of trash from the Pacific

Taxation: Commission refers Poland to Court for failing to remove certain tax exemptions on the use of energy products by highly polluting businesses

India’s strategy in space is changing. Here’s why

Why embracing human rights will ensure Artificial Intelligence works for all

These German businesses are hiring refugees to plug the skills gap

A safer, more dignified journey for all migrants, tops agenda at global conference in Marrakech

The EU learns about fishing and banking from tiny Iceland

Is China about to launch its own cryptocurrency?

Trade in fake goods is now 3.3% of world trade and rising

Germany is turning its old mines into tourist hotspots

One in three fish caught never gets eaten

Trade barriers: EU removes record number in response to surge in protectionism

ECB ready to counter the rise of the euro?

The world needs a grand coalition to tackle climate change

From coca to cocoa: three lessons from Peru on how farmers can leave the drug trade behind

The world condemned by neo-liberals to feed trillions to banks: the New Deal exorcised

‘Habitual residence’ rules deprive EU workers from social benefits

South Africa’s economy in 5 charts

These countries have the most expensive childcare

Parliament backs measures to cut e-commerce VAT fraud

Commission launches new tool to support digital teaching and learning in schools

Chart of the day: This is how many animals we eat each year

Health conditions for citizens of Yemen’s key port city ‘remain critical’ says UN agency

Asia and Pacific on course to miss all Sustainable Development Goals, says UN region chief

The EU-US trade agreement, victim of right-wing extremists and security lunatics

Statement by OECD Secretary-General Angel Gurría on the outcome of COP 25

EU opens a third antitrust file against Google

These are the 4 most likely scenarios for the future of energy

Here’s how the EU is doing on gender equality

Everything you need to know about the coronavirus

Sweden well ahead in digital transformation yet has more to do

How should cities prepare for self-driving cars? Here’s a roadmap

The EU resumes budget support assistance to the Republic of Moldova

Main results of EU Environment Council, 25/06/2018

Rising insecurity in Central Africa Republic threatens wider region, Security Council told

Has the EU economy truly revived from the financial crisis?

UN, global health agencies sound alarm on drug-resistant infections; new recommendations to reduce ‘staggering number’ of future deaths

Some endangered languages manage to thrive. Here’s how

Is “Sustainable Development” a concept that integrates Health Literacy and Health Policy as a global health action?

GSMA Mobile 360 – Africa on 16-18 July 2019, in association with The European Sting

Four things Turkey did for business in the G20

JADE Spring Meeting Live Coverage: Entrepreneurial skills in the digital markets

Why did Cameron gain absolute majority? What will he do now? Will he vote ‘yes’ in Britain’s in – out EU referendum?

Gaza investigators call on Israel to review ‘rules of engagement’ as Gaza protest anniversary looms

Egypt urged to free prominent couple jailed arbitrarily since last June: UN rights office

Hiring is broken. Here’s how to fix it

ECB with an iron hand disciplines the smaller Eurozone member states; latest victim: Greece

Advanced economies still have plenty of work to do to reach Sustainable Development Goals

The Five Chinese Girls

Intervene, don’t overthink – the new mantra of systems design

A day in the life of a Rohingya refugee

The reverberation of permanent multiprofessional education in combating antimicrobial resistance: future generation prognostic change

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s