OECD: Review of carbon pricing and carbon taxes in G20 economies

The Organisation for Economic Cooperation and Development (OECD) today released a report regarding carbon pricing and carbon taxes, or emission trading systems, by G20 countries.

According to a related OECD release, approximately half of all energy-related CO₂ emissions in G20 economies are now covered by a carbon price with several countries having introduced or extended carbon taxes or emissions trading systems in the last few years.

The OECD report released today—Carbon Pricing in Times of COVID-19: What has changed in G20 economies?—concludes that G20 economies priced 49% of CO₂ emissions from energy use in 2021 (up from 37% in 2018) and that this increase was driven by:

• New emissions trading systems in Canada, China, and Germany
• New carbon levies in Canada
• A new carbon tax in South Africa
• The introduction of carbon taxes in Mexico at the subnational level

The OECD continued to explain that recent progress has been driven by “explicit” carbon pricing which uses carbon taxes and emissions trading systems to raise the cost of carbon-intensive fuels, and thus to encourage more climate-friendly choices. This regime also was found to generate revenue that can be used to provide support targeted at improving energy access and affordability, enhanced social safety nets and investments in low-carbon infrastructure as well as offering incentives for investments in clean technologies.

The OECD noted that 12 G20 economies now have explicit carbon pricing instruments or participate in the EU emissions trading system.

The OECD report also calculates an average “effective carbon rate” (the sum of explicit carbon prices and fuel excise taxes) for G20 economies.