Pricing Greenhouse Gas Emissions

Abstract

Containing the risks of climate change requires accelerating the transition to net zero greenhouse gas (GHG) emissions.Countries can employ or reform a wide range of policy instruments to cut GHG emissions, including price-based instruments.This report tracks how carbon taxes, tradeable emission permit prices, energy taxes and subsidies -together an important subset of price-based instruments -have evolved between 2018 and 2021.This is the first report in the newly established OECD series on Carbon Pricing and Energy Taxation.The series combines the Taxing Energy Use and Effective Carbon Rates database and publication series.The report presents the main findings from the database, tracking governments' evolving use of carbon pricing and energy taxation.The level of detail in the publication is high, yet it does not reflect the full granularity of the database, which is available on OECD.STAT.The report will inform the work of the Inclusive Forum on Carbon Mitigation Approaches, an OECD project that seeks to take stock of countries' diverse approaches to climate change mitigation and estimate their effectiveness, with a view to strengthening dialogue to scale up combined action to reach net zero emissions by mid-century.This report is released in a time of turmoil on energy markets.Energy price hikes experienced since 2021 have presented policy makers with even greater challenges in their efforts to use carbon pricing to reduce GHG emissions.Energy taxes have been cut in several countries, as part of governments' emergency responses.Even though the report focusses on long run trends between 2018 and 2021, it provides indications of how tax cuts and fossil fuel subsidies affect effective carbon prices.The need for supporting energy affordability is clear, but its form could change over time, with more emphasis on targeted income support than on broad tax cuts.This will help to reduce the risk that the policy responses to the current energy crisis slow down the transition to net zero, which would also better protect energy users from fossil fuel price shocks in the future.

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