Friday 8 November 2013

OECD – Taxing and trading ‘cheapest ways of reducing CO2’

Carbon taxes and emissions trading systems are the cheapest ways of reducing CO2 emissions according a new OECD study.

The report found they are more cost effective than other instruments such as feed-in tariffs and subsidies. It added that in general market-based measures tended to be better value for money.

The study looked at government policies in 15 countries, examining high emission sectors such as electricity generation, road transport and cement production.

It found avoiding one tonne of CO2 emissions in the electricity sector cost on average €176 (£110) using subsidies and €169 (£105) using feed-in tariffs, yet cost just €10 (£6.23) using an emissions trading system - a bargain by comparison.

The OECD said despite being cheaper, carbon taxes and emissions trading systems tended to be less common and were “easy targets for political opposition” as their cost was more obvious. The organisation has repeated its call for the measures to be placed at the heart of government policy to curb climate change.

OECD Secretary-General Angel Gurria said: “Countries are pricing carbon in a multitude of ways, not always the most effective.”

He added: "There has been a huge amount of taxing and regulating around carbon, with prices established too high or too low and the outcome has been far from optimal. This is a chaotic landscape that sends no clear signal and must be addressed.”