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Tax policy analysis

Tax and the environment

 

By putting a price on pollution, taxes and tradable permit systems incentivise emissions abatement at the lowest possible cost. The OECD's work on tax and the environment investigates to what extent countries harness the power of taxes and tradable permit systems for environmental and climate policy. Additional topics of expertise include the interaction between environmental taxation and the broader tax system, and the impacts of environmental taxes on competitiveness and on equity.

CARBON PRICING IN FIGURES

  • The Effective Carbon Rate (ECR) is the effective price signal applicable to carbon emissions, resulting from carbon taxes, fuel excise taxes, and the prices of tradable emissions permits.

  • Around 60% of CO2-emissions from all energy use in 44 OECD and G20 countries are not subject to an ECR at all, and only around 10% to a rate of at least EUR 60 per tonne. Hence, approximately 90% of emissions are priced below a mid-range estimate of the costs of CO2-emissions to society in 2020 and a low-end estimate in 2030, being EUR 60 per tonne.

  • The Carbon Pricing Score (CPS) indicates how close OECD and G20 countries are, together as well as individually, to pricing all energy related carbon emissions at benchmark values for carbon costs. It describes the state of carbon pricing and can be compared across countries and time. At EUR 60 per tonne the CPS is 19% for the 44 countries in 2018.

  • Countries' carbon pricing scores ranged from 1% to 69% in 2018. Countries with a high score tend to emit fewer emissions than countries that hardly price any emissions. High-score countries also emit less CO2 per unit of GDP and are better prepared for the low carbon economy.

  • Country-specific figures on carbon pricing are available for 44 OECD and G20 countries and a new report takes stock of how carbon prices have evolved across G20 economies between 2018 and 2021.

 

BLOG POST

 

 

KEY PUBLICATIONS

book

Pricing Greenhouse Gas Emissions: Turning Climate Targets into Climate Action

This report tracks how explicit carbon prices, energy taxes and subsidies have evolved between 2018 and 2021.  The report covers 71 countries, which together account for approximately 80% of global GHG emissions and energy use. Explicit carbon prices, as well as energy taxes and subsidies are detailed by country, sector, product and instrument.
book Taxing Energy Use 2019: Using Taxes for Climate Action

Taxing Energy Use provides unique information on energy and carbon taxes in OECD and G20 countries. Tax rates and tax base coverage are detailed by country, sector, energy source and tax type. The use of a common methodology ensures full comparability of tax rates and structures across countries. Summary indicators facilitate cross-country comparisons. Well-designed energy tax systems encourage citizens and investors to favour clean over polluting energy sources. Reforming energy tax systems is a key component in the fight against climate change and delivers co-benefits in the form of reduced health damages from local air pollution.
book Effective Carbon Rates 2021: Pricing Carbon Emissions through Taxes and Emissions Trading

Carbon pricing very effectively encourages the shift of production and consumption choices towards low and zero carbon options that is required to limit climate change. Are countries using this tool to its full potential? This report measures the pricing of CO2-emissions from energy use in 44 OECD and G20 countries, covering around 80% of world emissions. The analysis takes a comprehensive view of carbon prices, including fuel excise taxes, carbon taxes and tradable emission permit prices. The "carbon pricing score" measures how close the 44 countries, together as well as individually, are to the goal of pricing all energy related carbon emissions at current and forward-looking benchmark values for carbon costs. The report highlights the structure of effective carbon rates across countries and sectors in 2018 and discusses change compared to 2012 and 2015. It also provides an outlook on recent trends in emissions trading in China and the European Union.

KEY REPORTS

 

EVENT

OECD COP27 Virtual Pavilion: What role for carbon prices as energy market turbulence continues?

10 November 2022 | 14:00-15:00 CET

The #OECDatCOP27 virtual pavilion gathered leading experts to discuss solutions to accelerate climate action and reach the goals of the Paris Agreement. Discussions were held on how to advance carbon pricing and greenhouse gas mitigation efforts for climate action.

 

FURTHER INFORMATION

 

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