Taxing Energy Use 2019
OECD #GreenTalks LIVE
15 October 2019
@OECDtax
@OECD_ENV

Climate action is urgent
Keeping climate change at bay in line with the goals of the Paris Agreement will
require deep cuts in emissions.
Public pressure is mounting for action on climate change.
In the absence of decisive action, extreme weather events will become more
frequent and severe, and rising sea levels will endanger coastal cities and entire
island states.
Yet: energy-related CO2 emissions reached an all-time high in 2018.
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What contribution can energy and carbon taxes
make in curbing climate change?
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Other goals of tax and fiscal policy: Revenue, equity, affordability, competitiveness.
Other environmental challenges: Air pollution, etc.

Main results:
Taxes are nowhere near their full potential
Taxes on polluting fuels remain too low to reduce the risks and impacts of
climate change and air pollution
Across 44 OECD and G20 economies, 70% of energy-related CO2 emissions are
not taxed at all
Energy tax systems provide too little incentive to move to cleaner energy
Policy reforms can improve environment and climate outcomes and boost the
performance of the fiscal system to promote equity, well-being,
competitiveness, and efficient tax policy
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Taxing fuels is not the only way to price carbon
Jurisdictions can use taxes to price carbon, or
they can introduce emissions trading systems
(e.g., EU ETS, California & Quebec,…).
Broadening the scope to emissions trading
systems does not change the overall
conclusion
Related policy issue: Fossil fuel subsidies

First released in 2013
Snapshot of where OECD
countries stand in
deploying energy and
carbon taxes
Extension of country
coverage in 2015
Inclusion of 7 OECD
Partner Economies
Tax rates for 2012
First Update in 2018
Update of tax rates to
2015. Analysis of change
from 2012 to 2015
Second Update in 2019
Tax rates for 2018
Inclusion of international
aviation and maritime
transport
Now covers 44 OECD and
G20 countries
Taxing Energy Use: What’s new?
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Scope of Taxing Energy Use 2019
1. Compares tax-based carbon price signals against a low-end carbon
price benchmark of EUR 30/tCO2, taking a broad economic approach
2. Analyses tax-based energy price signals in EUR/GJ across all forms
of energy use, including clean energy sources
Breaks down tax rates and tax base by
Country
Sector, and
Energy category
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Overall, taxes are not being used to provide
meaningful carbon price signals
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Average*
fuel excise
per tCO2 in 2018
Average*
explicit carbon tax
per tCO2 in 2018
Average*
effective carbon tax
per tCO2 in 2018
Coal and other
solid fossil fuels
0.61 0.13 0.73
Fuel oil 3.50 0.46 3.96
Diesel 70.65 3.11 73.76
Kerosene 4.27 0.34 4.61
Gasoline 84.34 1.50 85.83
LPG 10.23 0.89 11.12
Natural gas 4.08 1.19 5.26
* Emission-weighted average across all 44 countries and int. aviation & maritime

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Outside road transport, the bulk of carbon
emissions are completely unpriced

Using taxes for climate action raises revenues –
unlike most other climate policy instruments
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Revenue estimate based on back-of-the-envelope calculation.

Explicit carbon taxes do not cover all emissions
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What does a carbon price signal of EUR 30/tCO2 look like
in practice?
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Energy category
Low-end carbon benchmark
(EUR 30 per tonne of CO2)
Coal and other solid fossil fuels 6.24 eurocent per kilogramme
Fuel oil 8.94 eurocent per litre
Diesel 7.99 eurocent per litre
Kerosene 7.58 eurocent per litre
Gasoline 6.86 eurocent per litre
LPG 4.75 eurocent per litre
Natural gas 5.13 eurocent per cubic metre

Many countries do not only tax fuels, but also tax
electricity, regardless of how it is generated
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Key takeaways
1. Strengthening carbon prices will encourage citizens and businesses to
take the climate costs of their actions into account and make cleaner
investment and consumption choices.
2. Increasing carbon prices first where they are currently lowest makes
sense (coal, international aviation and shipping, etc.).
3. In some countries even revenue-neutral electricity tax reform could
strengthen incentives to reduce emissions.
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TEU 2019 – Green Talk: Outline
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Q&A

Would you like to know more?
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1. Report: Taxing Energy Use 2019,
includes country tax profiles.
2. Online country notes: Discuss
how energy taxes apply across
sectors in additional detail.
Access the publication: http://oe.cd/TEU2019

Related ongoing OECD work
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Access the publication: http://oe.cd/climate-wellbeing

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