Tax & subsidise

Price carbon and address barriers to the energy transition

Pricing carbon emissions and phasing out fossil fuel subsidies are vital to lowering the carbon footprint of electricity generation. Switching from coal to renewables (and to a lesser extent to natural gas) will not only reduce greenhouse gas emissions, but deliver other positive effects, from reducing air pollution to creating jobs in renewable energy and related sectors.

Carbon pricing will speed up the deployment of clean and renewable energy and drive investments towards zero-carbon technologies, while generating government revenue. In 2012-16, a United Kingdom carbon tax scheme called the Carbon Price Support (CPS) led to a 78% reduction of coal use in electricity generation and a 58% decrease in CO2 emissions, with marked improvements in air quality and continued affordability.

Targeted income transfers can also help affordability. For example, in 2016, France switched from social energy tariffs to energy cheques to help households pay their energy bills. Depending on income and building characteristics, 5.8 million eligible households received a cheque of up to EUR 277 in 2019 to go towards utility and electricity bills.



Video: Carbon Pricing Trends, OECD (2018)

Report: Taxing Energy Use 2019: Using Taxes for Climate Action, OECD (2019)

Report: Effective Carbon Rates 2018 & Inventory of Fossil Fuels, OECD (2018)