Taxation and Energy Use: Two new OECD Reports

While debate over the best way to deal with Carbon Emissions and how to mitigate the effects of climate change continues in Australia, it seems that in other parts of the world a less divided more sanguine approach is being taken. At least that is what two new reports from the OECD would seem to be indicating.

The two new reports (released 28 January 2013) claim to provide “wide-ranging evidence of how reforming subsidies and tax breaks for fossil fuels and rationalising fuel taxes can help countries boost finances and meet green objectives”.

The first report Taxing Energy Use is described as providing “the first systematic, comparative analysis of the structure and level of energy taxes in the 34 OECD member countries.”

The report sets out the variation in tax rates between different types of fuel and different uses of fuel for each country and usefully provides the information in graphic form.

Further, the report calculates what statutory tax rates on diverse fuels imply in terms of taxation per unit of energy and per unit of carbon dioxide (CO₂) emissions and shows the wide variations in these effective tax rates across countries. It also details how rates vary widely within countries between different types of fuel even when used for similar purposes.

The second report  Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels 2013 is described as collecting details on more than 550 fossil fuel support measures in the 34 OECD member countries, including many provided by state and provincial governments and also highlights the progress made and benefits identified in reforming support to fossil fuels.

Some examples given are:

Germany reduced its total amount of estimated support for fossil-fuel production by more than half, to about EUR 2 billion (0.1% of GDP) in 2011, reflecting a decision to phase out support to the hard coal industry by 2018.

Mexico has introduced a new and more efficient cash-transfer scheme to help poor households cover their energy needs, as well as a pilot programme to replace electricity subsidies for pumping irrigation water with direct cash transfers in some states, thereby removing the price distortion that has led to significant over-exploitation of groundwater.

The United States has proposed a federal budget for FY2013 that would eliminate a number of tax preferences benefitting fossil fuels, which could increase government revenues by more than USD 23 billion over the 2013-17 period.

Full press release available here. 

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