6th International Tax Dialogue Global Conference

 

6th ITD Global Conference: Tax and the Environment

Opening remarks by Angel Gurría,

Secretary-General, OECD

OECD, Paris, France

1 July 2015

(As prepared for delivery)

 

 

 

Excellencies, Ladies and Gentlemen,

 

It is a great pleasure to be here for the sixth global conference of the International Tax Dialogue. Welcome to Paris, and to the OECD!

6th ITD Global Conference - Tax and the Environment

1 July 2015 - OECD Secretary-General Angel Gurría at the opening of the 6th ITD Global Conference - Tax and the Environment. OECD Headquarters, Paris, France.

Photo: OECD/Andrew Wheeler

In five months’ time, world leaders will gather here in Paris to address climate change – perhaps the greatest global threat facing us today. I have said it before, and I will say it again: we are on a collision course with nature. This year’s COP21 presents a unique opportunity. It will need to forge a clear path for reducing emissions, and for lessening our impact on the planet. It is therefore timely that this year’s International Tax Dialogue focuses on the role that tax can play in managing these environmental challenges.

 

Current efforts to protect the environment remain inadequate

 

Despite greater awareness of the challenges we face, our societies are not doing enough to protect the environment. The impact of pollution on human health and on the environment remains unacceptably high. And while we are aware of the risks presented by climate change, we have not yet taken strong enough action to reduce greenhouse gas emissions.

 

Taxes are one of the most potent environmental policy instruments. But we are not using them to their full potential. Last week, I launched the 2015 edition of the OECD’s Taxing Energy Use, which extends the work we did in 2013 on energy use and taxation patterns beyond the 34 OECD economies and now also includes Argentina, Brazil, China, India, Indonesia, Russia and South Africa. Together, these 41 countries represent 80% of global energy use.

 

The average tax rate on all energy use across these 41 countries is still just 14.8 Euros per tonne of CO2, one half of the estimated social cost of 30 Euros per tonne. Our analysis leaves no doubt: tax policy is simply not doing enough to address the environmental side effects from our reliance on coal, diesel, and other fossil fuels.

 

Excellencies, Ladies and Gentlemen,

 

The partners of the International Tax Dialogue share the conviction that putting a price on carbon alone is not sufficient to address the environmental challenges we face, but it is an essential part of the solution.

 

We need to tackle inconsistent and incoherent policies, including energy taxes

 

Current energy taxes are often too low – in particular for coal, which is sometimes not taxed at all; and they are incoherent, with different tax levels on energy types with similar environmental impacts. For example, in 39 out of the 41 countries surveyed, diesel is taxed at lower rates than gasoline, despite its greater environmental footprint.

 

The average tax rate on energy use in the transport sector is 70 euros per tonne of CO2, but we tax energy use on heating and electricity production at only 3 euros per tonne. Not only does it make no environmental sense, it makes no economic sense.

 

Tomorrow, I will be launching in London a new report that we have prepared together with the IEA, NEA and ITF called Aligning Policies for a Low-carbon Economy. In it, we look at the spectrum of policy areas that impact on climate change – tax, investment, trade, innovation, and skills, for example. And we show how these policies are often misaligned; working against a government’s own environmental objectives. If we want to unleash the full power of carbon pricing, we must also remove the barriers and inconsistencies across the whole policy spectrum.

 

Environmental taxes and competitive economies can be compatible with each other

 

Excellencies, Ladies and Gentlemen,

 

In order to make progress, we need to clear up some of the myths surrounding green growth. Recent work undertaken by the OECD demonstrates that taxes on energy use are less regressive than is commonly thought – in fact, in many cases they are not regressive at all. The impact of current policies on competitiveness is very small or inexistent, meaning that a gradual increase in environmental taxation is compatible with a competitive economy.

 

Securing a green future need not come at the cost of economic growth. If we are to learn the lessons from the crisis, growth must be balanced, inclusive and sustainable – and that includes environmental sustainability. Tax policy is a strong lever we can use to make significant advances.

 

Your support is crucial in all of this. When it comes to the environment, we cannot work alone. Today’s gathering can help forge a new dynamic. I hope that your discussions over the coming days will have a tangible impact on your climate policies at home, and that together, we build support for a successful outcome in Paris this December.

 

Thank you.