Carbon Pricing Plans Should Consider Plight of Poor, OECD Says

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By Rick Mitchell

Well-designed carbon pricing reforms can address both climate risks and energy affordability for low-income households, the Organization for Economic Cooperation and Development said May 11.

In a reportfrom its Center for Tax Policy and Administration, the OECD said that because carbon pricing reforms increase energy prices, they particularly hit poor households, which typically spend a large share of their income on energy bills.

So the Paris-based policy body recommended addressing “affordability risks” by using some of the additional revenue from higher energy taxes to ease the pain for lower-income households.

Redistributing one-third of any additional tax revenues through cash-transfers is enough to reduce affordability risk in many countries, the OECD said.

The Paris-based policy body, whose members are mainly wealthy countries, has long argued that a core component of any policy for fighting climate change should be carbon pricing that cuts carbon dioxide emissions from energy use.

According to the International Energy Agency, energy consumption accounts for about two-thirds of carbon emissions responsible for global warming.

But in a report last year, the OECD said 80 percent of global carbon emissions from energy use are not yet subject to any carbon rate on energy.

To contact the reporter on this story: Rick Mitchell in Paris at correspondents@bna.com

To contact the editor responsible for this story: Greg Henderson at ghenderson@bna.com

For More Information

The OECD report is available at http://src.bna.com/oMW

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