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Still Too Many Tax Breaks For Fossil Fuels, Says OECD

by Ulrika Lomas, Tax-News.com, Brussels

24 September 2015


Tax incentives for fossil fuel consumption and production in OECD countries and emerging economies are hampering global efforts to curb emissions and combat climate change, the OECD has said, estimating that government support is worth some USD160-200bn annually.

A new report, The OECD Inventory of Support Measures for Fossil Fuels 2015, takes stock of almost 800 spending programmes and tax breaks used by governments in the 34 OECD countries and 6 key emerging G20 economies (Brazil, China, India, Indonesia, Russia, and South Africa) to encourage the consumption or production of fossil fuels. These include measures that reduce prices for consumers, as well as those that lower exploration and exploitation costs for oil and gas companies. The OECD has been measuring public support for fossil fuels since 2009, when G20 members committed to phasing out "inefficient fossil fuel subsidies" as part of wider efforts to combat climate change.

Around two-thirds of the measures identified in the OECD Inventory were introduced before the year 2000, and in a very different economic and environmental context. Changing policy priorities make it necessary for governments to rethink the relevance and effectiveness of policies that use taxpayers' money to sustain our reliance on fossil fuels, the OECD said.

The OECD Inventory shows that while slight progress has been made over the past three years, total support to fossil fuels remains high, reinforcing the need for sustained reform efforts. Lower oil prices present a unique opportunity for governments to phase out support for the consumption and production of fossil fuels, it says.

"The time is ripe for countries to demonstrate they are serious about combating climate change, and reforming harmful fossil fuel support is a good place to start," said OECD Secretary-General Angel Gurría.

"Governments are spending almost twice as much money supporting fossil fuels as is needed to meet the climate-finance objectives set by the international community, which call for mobilising USD100bn a year by 2020. We must change the course. This new OECD Inventory offers a roadmap to turn around harmful policies that are a relic of the past, when pollution was still seen as a tolerable side effect of economic growth."

TAGS: Russia | South Africa | environment | tax | India | China | oil and gas | Brazil | Indonesia | tax breaks | G20 | Africa | Tax

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