Taxing Energy Use 2019 was released by the OECD on 15 October 2019. The publication gives a picture of the activity by governments in introducing energy and carbon taxes, looking at the progress made and reaching conclusions on how governments could improve their approach. Tax rates and tax coverage are detailed by country, sector, energy source and tax type. Taxing Energy Use 2019 uses a common methodology that permits comparability of tax rates and structures.

The need for increased activity in introducing efficient tax and pricing systems for carbon emissions is shown by the statistics. The goals of the Paris Agreement require large reductions in carbon emissions, but statistics show that global energy consumption increased sharply in 2018, and carbon dioxide emissions related to energy rose to an all-time high.

Taxes can be used to price carbon or emissions trading system as in the EU, California and Quebec. Production and consumption decisions are guided by prices and taxes can be used to change the price signal. Taxation could, for example, be used to increase the attractiveness of renewable energy production. The evidence shows that taxes are not being used to give meaningful signals on carbon pricing. Taxes are nowhere near their full potential for encouraging cleaner energy policies.

The results of the study show that taxes on the fuels giving rise to pollution are still too low to reduce the risks and impacts of pollution and climate change. Apart from the taxes related to road transport, most carbon emissions are not priced at all. Although road transport is responsible for a proportion of carbon emissions there are many other sources of emissions in other industries and households.

Unlike most climate change policy instruments, taxes on pollution and carbon emissions can raise revenues. Action to strengthen carbon prices would encourage businesses and individuals to take into account the climate costs of their activities and lead to investment in cleaner alternatives and to cleaner consumption choices. Carbon prices could be increased where they are lowest, such as in coal, international aviation and shipping. In some cases revenue-neutral tax reform in relation to electricity tax would provide more encouragement to reduce emissions.

Emissions trading systems such as the EU’s ETS can also be effective in reducing emissions, by indirectly influencing the carbon price. But despite the existence of such systems the carbon pricing measures are currently not sufficient.