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OECD Urges Greater Use Of Green Taxes

by Mike Godfrey, Tax-News.com, Washington

30 June 2015


The Organisation for Economic Cooperation and Development (OECD) has said in a new report that governments are under-utilizing taxation as a tool to curb the environmental consequences of energy use.

The report, entitled Taxing Energy Use 2015: OECD and Selected Partner Economies, said that there is strong evidence that taxes are one of the most cost-effective ways to curb the negative side effects of energy use.

OECD Secretary-General Angel Gurría said: "Tax policy is not being used effectively to reduce the adverse health impacts and emissions of greenhouse gases resulting from energy use." He added that there is still considerable scope to use taxation to improve the environment and contain climate change.

The report compared taxes on energy use in 41 countries worldwide, which together use 80 percent of global energy. It found that the weighted average effective tax rate on all energy use across the 41 countries is EUR14.8 (USD16.5) per ton of CO2 from energy use, well below estimates of the social cost of carbon, at around EUR30 per ton. When the cost of other negative side effects from energy use are also considered, this strengthens the conclusion that average tax rates are very low relative to the harmful effects of fuel use, it said.

Coal, which contributes significantly to climate change and local air pollution, is the lowest and least frequently taxed fuel, according to the report. 85 percent of coal used for heating and processing purposes in the 41 countries is untaxed, and the average tax rate on coal is less than EUR2 per ton of CO2. By comparison, oil products are taxed at EUR49 per ton of CO2 on average, with the vast majority of oil products subject to energy taxes.

The report also said that economy-wide tax rates on energy vary widely, from just over EUR0 per gigajoule and ton of CO2 in Indonesia and Russia to EUR107.3 per ton of CO2 in Switzerland.

TAGS: Russia | environment | Energy | tax | economics | fiscal policy | energy | environmental tax | oil and gas | tax rates | Indonesia | Switzerland | Tax

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