Taxing carbon emissions pushes polluters to find less polluting alternatives. However, in some countries, like Australia, carbon tax makes for hot politics. Some in the Australian government described it as “a great big tax on everything” before removing it in 2013.
In Switzerland, where politics inches forward based on consensus, more durable progress has been made on taxing emissions.
Last month, the OECD published data on carbon pricing, which presents the percentage of polluting activities, such as electricity generation, road transport, residential and commercial emissions, off road, industry and agriculture and fisheries emissions, that are taxed. From this it creates a gap, a measure of how much emissions are slipping through the net untaxed.
Switzerland (27%) has the lowest overall carbon pricing gap, Large countries such as Russia (100%), Indonesia (95%), Brazil (94%), China (90%), South Africa (89%) and India (86%) have the biggest gaps.
However, Switzerland’s solid overall carbon tax performance hides some black spots. Only 29% of emissions from electricity generation are taxed at US$30 or more per tonne. Switzerland is not alone – electricity generation is one of the least taxed activities globally. Of the 42 OECD countries covered, only Argentina (13%), the UK (79%), Greece (12%), Israel (1%) and Mexico (1%) are taxing emissions from electricity generation. The rest levy no tax at this level. Only 1% of global electricity is taxed at at least US$30 per CO2 tonne.
Worldwide, 57% of road carbon is taxed at at least US$30 per tonne. Road is the world’s most carbon taxed sector. Switzerland does well on road emissions, taxing 90% at at least US$30 per tonne.
As the world rushes to electrify road transport the carbon pricing gap could rise, as gaps in current carbon taxing encourage a shift from vehicles running on highly taxed petrol and diesel to ones powered by largely untaxed electricity from high-carbon power stations. This could effectively lead to a switch from petrol and diesel to coal – around 40% of global electricity comes from coal and a further 26% from oil and gas.
Industry is another of Switzerland’s black spots. The percentage of industry emissions taxed at US$30 or more per tonne is only 18%. Carbon taxing industry is a global challenge. Only Norway (46%), Finland (42%) and Slovenia (39%) have managed to make much headway on this. Belgium (0%), Brazil (0%), Canada (0%), Chile (0%), Indonesia (0%), Russia (0%) and the US (0%) tax no industry emissions at U$30 or more per tonne. Indonesia (0%), Chile (0%), Australia (3%), South Africa (4%) and the US (7%) charge industry no or close to no carbon tax at any level.
Switzerland does well on carbon taxing residential and commercial (80%). On the other hand Brazil, Chile, Indonesia, India, South Africa and the US charge zero or close to zero tax on residential and commercial emissions.
The report doesn’t give detailed figures for off road and agriculture and fisheries, however globally 71% of agriculture and fisheries and 77% of off road are taxed at less than US$30 per tonne of CO2 emissions.
The report warns that failing to price carbon now, raises the risk of the planet overheating by five degrees or more. Adapting to such a rise might not be possible, but even if it is, it would be highly costly.
Put another way, “a great big tax on everything” today might be far less devastating and cheaper than trying to survive on an over heated planet.
Drought stricken farmers in Australia are already feeling the heat.
OECD report (in English)