Decarbonisation keeps climate change in check and contributes to cleaner air and water. Carbon pricing is a cost-effective means of reducing CO2 emissions, but countries are still not using this tool to its full potential to curb climate change. xperts from the OECD Centre for Tax Policy and Administration presented the key findings from their report on Effective Carbon Rates, which measures pricing of CO2-emissions from energy use in 42 OECD and G20 countries, covering 80% of world emissions, and provided a first appreciation of countries’ progress since 2012.

1. CARBON PRICING
TRENDS
OECD #GreenTalks LIVE
18 September 2018
Measuring the momentum
@OECDtax
@OECD_ENV

2. CONTEXT
 Tax and the environment
 Effective Carbon Rates
EFFECTIVE CARBON RATES
 Key findings from the report “Effective Carbon
Rates 2018 – Pricing Carbon Emissions through
Taxes and Emissions Trading”
 Summing up
Q&A
Webinar outline
2

3. Tax and the environment at the OECD
Carbon
pricing,
energy
taxes
Environmental
fiscal reform
Country
work
3
Effective Carbon Rates,
Taxing Energy Use
Working papers on political
economy aspects and carbon
price design, including
interactions with FFS.
Applying insights of
analytical work to country
contexts
(Mexico, Costa Rica, Slovenia,…)
G7 paper on principles and
practice;
Working papers (“Diesel
differential”, “Company Car support”,
“Energy affordability”, “Technology
bias”, “Free permit allocation”,...)
Principles and applications

4. Today’s release:
Effective Carbon Rates 2018
4
1. Report: Effective Carbon Rates
2018 – Pricing Carbon Emissions
through Taxes and Emissions
Trading
2. Country notes: available for all 42
countries
http://oe.cd/ECR2018

5. First released in 2016.
Covers 42 OECD and G20 economies, for the
year 2012. Includes tradeable permit prices,
carbon taxes, and excise taxes on energy use,
by sector, presented in the same way for all
countries for comparability.
Second report in 2018,
with updated profiles for
42 OECD and G20
economies
and comparison of 2012, 2015
and (estimated) 2018 patterns.
Intention to update
regularly
Effective Carbon Rates
5
2016 2018

6. 6
Effective Carbon Rates 2018 - Highlights
Effective carbon rates remain too low
to drive deep decarbonisation in line with Paris Agreement targets
Effective carbon
rates consist mainly
of fuel excise taxes
but emissions
trading is important
for electricity
The carbon pricing
gap declines
from 83% in 2012
to 76.5% in 2018
Rates differ strongly
between and within
sectors
but the carbon
pricing gap is large in
all sectors other than
road transport

7. 7
Effective Carbon Rates 2018 – a closer look

8. Emission permit price
Carbon tax
Specific taxes on
energy use
Effective Carbon Rate
(EUR per tonne of CO2)
8
Effective Carbon Rates – What
Effective carbon rates:
Measure the strength of price-based incentives to reduce CO2 emissions from energy use
Effective Carbon Rate (ECR),
expressed in EUR/tCO2
{

9. 9
Effective Carbon Rates – Why
Carbon pricing:
Effective and very economic decarbonisation policy
Supports the low carbon transition and strengthens long run
competitiveness
Key element of climate policy toolkit
Effectiveness illustrated:
Australia, United Kingdom

10. 10
United Kingdom CO2 emissions fell sharply with the
introduction of the carbon price support
Electricity sector 2012 2016
Change
(2012-2016)
Change in %
Effective Carbon Rate
(in EUR per tonne of CO2)
7.24 32.40 25.16 +347%
Permit Price in EU ETS
(in EUR per tonne of CO2)
7.24 7.6 0.36 +5%
Carbon Price Support (CPS)
(per tonne of CO2)
0 GBP 18
(EUR 24.80)
GBP 18
(EUR 24.80)
CO2 emissions in Mt 158 66 -92 -58%
Coal use in Mt 54 12 -42 -78%
United Kingdom emissions declined by 25% from 2012 to 2016;
19 percentage points are due to cleaner electricity generation

11. 11
Australia’s CO2 emissions fell sharply with the
introduction of the carbon tax
Australia introduced a carbon tax in June 2012 and removed it in
July 2014. It applied to electricity generation but not to petroleum.
ChangeinCO2emissions
Source: Nadel (2016)

12. 12
Main results – the carbon pricing gap
• The carbon pricing gap measures the extent to which prices fall
short of a benchmark value (e.g., EUR 30/tCO2), as a percentage
• For the 42 OECD and G20 countries as a group, it summarises the
state of carbon pricing and the change over time.

13. 13
The carbon pricing gap
Carbon Pricing Gap:
EUR 30 benchmark rate
Effective Carbon Rate

14. 14
The carbon pricing gap in 2018 is 76.5%
Carbon Pricing Gap:
EUR 30 benchmark rate
Effective Carbon Rate

15. 15
The carbon pricing gap has declined slowly
Against the EUR 30/tCO2 benchmark, the gap declined by about
one percentage point per year:
2012: 83%
2015: 79.5%
2018: 76.5%

16. 16
The carbon pricing gap at the country level
• At the country level, the carbon pricing gap is also an indicator of
long-run competitiveness
• A zero gap indicates that a country decarbonises at lowest costs and
companies are incentivised to compete and thrive in a low-carbon
economy
• A high gap indicates that decarbonisation efforts remain limited or likely
are overly costly

17. 17
The carbon pricing gap differs across countries
27
30
34
41
42
42
42
42
43
43
46
46
51
51
52
53
53
59
60
63
65
65
65
66
67
67
68
69
70
71
75
75
76
76
79
80
86
89
90
94
95
100
CHE
LUX
NOR
FRA
SVN
ISL
GBR
IRL
NLD
KOR
GRC
ITA
AUT
ESP
DNK
DEU
FIN
PRT
SVK
SWE
ISR
CAN
BEL
HUN
POL
LVA
MEX
JPN
CZE
EST
USA
TUR
ARG
NZL
AUS
CHL
IND
ZAF
CHN
BRA
IDN
RUS
100 % gap
No gap
Gap in 2015 in %
20%
40%
60%
80%

18. 18
The carbon pricing gap differs by sector
Sector
Carbon Pricing Gap
at EUR 30/tCO2
Agriculture & fisheries 64%
Electricity 84%
Industry 91%
Offroad transport 56%
Residential & commercial 87%
Road transport 21%

19. 19
Taxes dominate ECRs except in electricity
Sector Share of tax component in total ECR
Agriculture & fisheries 98%
Electricity 19%
Industry 62%
Offroad transport 96%
Residential & commercial 93%
Road transport 99%

20. 20
Measuring momentum
Progress with carbon pricing is slow.
Levels often remain low, heterogeneity remains large.
Signs of increasing momentum
- A national ETS, or carbon tax, in China has the potential to change
the global carbon pricing landscape
- A variety of approaches exist to broaden the carbon pricing base and
increasing levels (Canada, France, Mexico, Korea, United Kingdom,
Switzerland,…)
- EU ETS reform efforts support higher prices (EUR 30 prices would reduce the gap
for the 22 EU ETS countries included in the report from 52% to 22%)

21. 21
What carbon pricing gap trajectory ?
100% gap
no gap

22. 22
Effective Carbon Rates 2018
Effective carbon rates remain too low
to drive deep decarbonisation in line with Paris Agreement targets
but there are signs of increasing momentum
Effective carbon
rates consist mainly
of fuel excise taxes,
emissions trading is
important for
electricity
The carbon pricing
gap declines
from 83% in 2012
to 76.5% in 2018
Rates differ strongly
across countries and
across sectors within
countries

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23
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