EaP GREEN: Overview of the use of environmentally-related product taxes in OECD countries

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The presentation by OECD environmental policy expert Nils-Axel Braathen provides an overview of the use of environmentally-related product taxes in OECD countries. The presentation was delivered in the context of the meeting on "Economic instruments for greener products in the EU Eastern Partnership countries" (EaP GREEN programme).

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  • As at 01.01.2010. One-off taxes on new vehicles only. “Small” refers to a petrol-based car with 53 kW of power, 6.5 l/100 km, 821 kg,1 000 cc engine, EUR 12 000 pre-tax price; “medium” refers to a petrol-based car with 132 kW of power, 9.4 l/100 km, 1 468 kg, 2 400 ccengine, EUR 25 000 pre-tax price; “large” refers to a petrol-based car/SUV with 300 kW of power, 16.8 l/100 km, 2 587 kg, 6 200 cc engine,EUR 45 000 pre-tax price. Countries with CO2 components in their taxes on motor vehicles are calculated based on fuel efficiency. Forcountries with sub-national governments that levy applicable rates, the following jurisdictions are used: New South Wales (Australia),Ontario (Canada), and California (United States). These tax levels do not include non-environmentally related taxes, such as VAT, norenvironmentally related tax components vary significantly between vehicles of a similar size, such as those based on NOx emissions from
  • EaP GREEN: Overview of the use of environmentally-related product taxes in OECD countries

    1. 1. OVERVIEW OF THE USE OF ENVIRONMENTALLY-RELATED PRODUCT TAXES IN OECD COUNTRIES Nils Axel Braathen, Principal Administrator, Environment Directorate
    2. 2. Revenues from environmentally related taxes In per cent of GDP, Selected countries, 2012 2 -2 -1 0 1 2 3 4 5 %ofGDP Other Motor vehicles Energy * 2011 figures ** 2010 figure
    3. 3. OECD published the book Taxing Energy Use: A Graphical Analysis in 2013. First systematic comparison of the taxation of all energy use across & within OECD countries. Considers taxes on fuels as effective taxes on energy & on carbon emissions, highlighting the price signals sent by taxes to different fuels & fuel uses. Provides a graphical & statistical profile of the structure of energy use & taxation in each of the OECD countries. Uses the underlying data to develop cross-OECD comparisons of effective tax rates on different users and sources of energy. 3 Taxing Energy Use www.oecd.org/tax/tax- policy/taxingenergyuse.htm
    4. 4. 4 Taxation of energy in the OECD area: On a carbon content basis Source: OECD (2013), Taxing Energy Use: A Graphical Analysis.
    5. 5. Energy tax rates, EUR per tonne CO2 5 USA POL SVK FRA DEU TUR 0 50 100 150 200 250 300 350 400 450 500 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Effective tax rate (EUR per tonne CO2) Source: OECD (2013),Taxing Energy Use: A Graphical Analysis
    6. 6. Taxes on petrol and diesel, € per litre 6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 €perlitre Petrol, 1.1.12 Diesel, 1.1.12 Petrol, 1.1.02 Diesel, 1.1.02
    7. 7. Taxes on motor vehicles One-off taxes, linked to the first registration of a motor vehicle; Recurrent (annual) taxes on the ownership of motor vehicles. Both types can be differentiated according to various (environmental) criteria: – Expected CO2 emissions; – Expected emissions of NOx or other pollutants; – Petrol vs. diesel motor; – Engine capacity in kW; – Engine size, in cm³; – Vehicle weight, etc. Also fuel taxes and other vehicle-related taxes and charges (e.g. road-use charges) will influence vehicle choices. 7
    8. 8. One-off taxes on motor vehicles 8 0 20 40 60 80 100 120 140 160 EUR(000s) Small Vehicle Medium Vehicle Large Vehicle Small: 53 kW; Medium: 132 kW; Large: 300 kW All petrol-driven In addition, Greece has introduced major motor vehicle taxes. Tax rates as of 01.01.10
    9. 9. CO2-related motor vehicle taxes Can be linked directly to expected CO2 emissions, or to the expected fuel efficiency of the vehicle. Since a litre of petrol and diesel causes emissions of a fixed amount of CO2 (2.343 and 2.682 kg respectively), the CO2 emissions are given once the fuel efficiency is known. Variations between petrol- and diesel-vehicles; depending on the price of the vehicle; according to vehicle ownership, etc. Can be part of a bonus–malus system, with subsidies for low- emission vehicles. At least 19 OECD countries (+ South Africa) apply some form of CO2-related differentiation of their motor vehicle taxes. 17 countries apply CO2-related one-off taxes. 9 countries apply CO2-related recurrent taxes. 9
    10. 10. 10 CO2 differentiation of vehicle taxes One-off taxes, tax per vehicle, petrol vehicles -20,000 -10,000 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 1 71 101 131 161 191 221 251 281 €pervehicle gram CO2 emitted per km driven Petrol-driven vehicles Austria, 10 000€ Austria, 25 000€ Belgium, Wallonia 10 000€ Belgium, Wallonia 25 000€ Belgium, Other 10 000€ Belgium, Other 25 000€ Canada Denmark Finland, 10 000€ Finland, 25 000€ France Israel Iceland, 10 000€ Iceland, 25 000€ Ireland, 10 000€ Ireland, 25 000€ Netherlands Norway Slovenia, 10 000€ Slovenia, 25 000€ Spain, 10 000€ Spain, 25 000€ Portugal UK USA South Africa
    11. 11. 11 CO2 differentiation of vehicle taxes Recurrent taxes, tax per year, petrol vehicles 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 1 71 101 131 161 191 221 251 281 €peryear gram CO2 emitted per km Petrol-driven vehicles Denmark Finland France (general) France (company) Germany Iceland Ireland Luxembourg Portugal UK Sweden
    12. 12. Taxes per tonne CO2 emitted over the vehicles’ lifetime Once tax rates per vehicle or per year are known, if one makes a few assumptions, one can calculate the tax rates per tonne of CO2 that the vehicle will emit over its lifetime. Assumes that – Each vehicle is driven 200 000km over its lifespan; – For recurrent taxes, the lifespan of each vehicle is 15 years; – Need also to decide on which discount rate to use (if any). 12
    13. 13. 13 CO2 differentiation of vehicle taxes Total taxes per tonne lifetime CO2 emissions, diesel vehicles -600 -400 -200 0 200 400 600 800 1,000 €pertonneCO2emittedoverthevehiclelifetime 100 gram CO2 per km -600 -400 -200 0 200 400 600 800 1,000 €pertonneCO2emittedoverthevehiclelifetime 150 gram CO2 per km -600 -400 -200 0 200 400 600 800 1,000 €pertonneCO2emittedoverthevehiclelifetime 200 gram CO2 per km -600 -400 -200 0 200 400 600 800 1,000 €pertonneCO2emittedoverthevehiclelifetime 250 gram CO2 per km One-off Recurrent
    14. 14. CO2-related vehicle taxes – Some comments I Some countries apply tax rates per tonne of CO2emitted that are very high, especially for high-emission vehicles. Keep in mind that each tonne emitted will do the same damage, regardless of whether it is emitted from a vehicle that causes large or small CO2 emissions per km driven. The emission reduction incentives that are provided in the vehicle sector are in some case out of proportion to the incentives given to other sectors of the economy. The taxes have contributed to a major reduction in vehicles’ average CO2 emissions – but the shift in demand contributes to reduce the amount of revenues raised. 14
    15. 15. Some countries apply higher tax rates per tonne CO2 emitted from diesel-driven than from petrol-driven vehicles, but each tonne of CO2 emitted causes the same harm. This is done to counteract a shift in demand towards diesel-driven vehicles that a focus only on CO2 emissions contributes to – with very negative impacts for local air pollution and human health. It is better to address this problem by including emissions of other air pollutants in the tax base – for example, like it is done in Israel. There emissions in gramme per km of CO, HC, NOx, PM10 and CO2 are given weights of 500, 900, 10 000, 20 000 and 30, respectively. The weights are used to calculate reductions offered in otherwise very high motor vehicle taxes, according to their “Green Grade”. 15 CO2-related vehicle taxes – Some comments II
    16. 16. 16 Taxes on lubricating oils 0.0 0.1 0.2 0.3 0.4 0.5 0.6 Australia Norway United States -- Alabama United States -- Florida Finland France Poland Slovak Republic Slovenia EURperlitreorperkg Per litre Per kg
    17. 17. 17 0 5 10 15 20 25 30 35 Denmark United States -- South Carolina Iceland Poland Portugal Slovak Republic Sweden Switzerland EURpercell/batteryorperkg Per cell / battery Per kg Taxes on nickel-cadmium batteries
    18. 18. 18 Taxes on vehicle batteries 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 EURperbatteryorperkg Per battery Per kg
    19. 19. 19 Environmental effectiveness: Fuel tax differentiation in the United Kingdom Revenues from different fuel categories, in GBP millions 0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 GBPmillions - Uneaded petrol - Leaded petrol - Ultra-low sulphur petrol - Diesel - Ultra-low sulphur diesel Reduced tax rate for ultra-low sulphur petrol Reduced tax rate for ultra-low sulphur diesel
    20. 20. 20 Environmental effectiveness: Fuel taxes and fuel use in the transport sector per GDP unit 0.0 0.2 0.4 0.6 0.8 1.0 0 10 20 30 40 50 60 70 80 90 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 United States 0.0 0.2 0.4 0.6 0.8 1.0 0 10 20 30 40 50 60 70 80 90 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Turkey 0.0 0.2 0.4 0.6 0.8 1.0 0 10 20 30 40 50 60 70 80 90 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 France 0.0 0.2 0.4 0.6 0.8 1.0 0 10 20 30 40 50 60 70 80 90 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Germany
    21. 21. Further information www.oecd.org/env/policies/database www.oecd.org/env/taxes www.oecd.org/env/tools-evaluation/carbon-prices.htm www.oecd.org/env/taxingenergyuse.htm Nils-Axel.Braathen@oecd.org 21

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