OECD says taxes on polluting fuels are too low to encourage shift to low-carbon alternatives


In France, 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.

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.

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