OECD criticises carbon pricing failures

8 Dec 15

OECD member states are “woefully lacking” in their efforts to put a price on carbon, the organisation has warned.

 

The think-tank urged 41 countries, who are between them responsible for 80% of the world’s emissions in 2012, to step up their efforts to price carbon after its analysis found that 90% of CO₂ emissions are priced too low and 60% are not priced at all.

Angel Gurría, secretary-general of the OED, said “implementation of the polluter pays principle is woefully lacking”.

He added: “We need an effective price on carbon emissions if we want to tackle climate change.”

“We cannot continue like this if reducing greenhouse gas emissions in a cost-effective manner is a true policy objective.”

The OECD’s Effective Carbon Rates in the OECD and Selected Partner Economies analysis included the OECD’s 34 member states along with Argentina, Brazil, China, India, Indonesia, Russia and South Africa.

It looked at the ‘effective carbon rate’, the total price on carbon emissions from energy use resulting from market-based policy instruments such as taxes and emissions permits, in each of the 41 countries.

It found that in total, 90% of CO₂ emissions are priced below €30 per tonne – an already low-end estimate of the cost of climate damage – and 60% of those are not priced whatsoever.

However when road transport emissions are removed from the equation, 70% of remaining emissions are not priced, 11% are priced below €5 per tonne and 15% are priced between €5 and €30. This means 96% of all emissions excluding road transport are priced below the already low cost of €30.

In road transport alone, 46% of emissions face a charge of over €30 per tonne of CO₂ as specific taxes on energy use are higher in road transport than in other sectors.

The report said that carbon taxes and emissions permit prices have the potential to bring more balance to rates across sectors, better align carbon prices with climate costs and improve their cost-effectiveness, but would require considerably higher carbon taxes or permit prices than are currently applied in most countries.

It added that the evidence “leaves no doubt that carbon pricing policies are not being utilised to their potential”, and increased reliance on carbon pricing would allow for more ambitious and effective climate policy, better economic outcomes and domestic co-benefits such as increases in air quality. 

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