Taxes should be increased to push companies towards using less energy and using green energy, according to a new report from the Organisation for Economic Development & Cooperation (OECD).

The report analysed taxes between 2012 and 2015 in 42 OECD and G20 countries, which together account for about 80% of global energy usage.

It found that, in 2015, 81% of emissions were untaxed, excluding road transport.

Of the emissions that were taxed, 97% were taxed at a level below the low-end estimate of climate cost.

Targeted transfers

Angel Gurría, Secretary-General at the OECD, said: “Efforts have been made, or are underway, in several jurisdictions to apply the ‘polluter-pays’ principle, but on the whole progress towards the more effective use of taxes to cut harmful emissions is slow and piecemeal.

“Aligning energy prices with the costs of climate change and air pollution is a core element of cost-effective policy, and vast improvements are urgently needed.

“While in some cases compensation for higher energy costs faced by households or firms may be deemed necessary, especially to those more vulnerable, lower tax rates or exemptions are not the way to provide it – targeted transfers should be favoured.”

> Read the report online