“Put a big fat price on carbon”: OECD chief bows out with climate rally cry.

Angel Gurria

This is the headline from a Guardian article. The article is an interesting spin on Gurria’s 15 years at the head of the OECD. I worked with him in BIAC from 2006 to 2012, he’s a nice person in my experience. But OECD hasn’t really taken the lead in pushing this agenda forward, perhaps constrained by the attitude of its biggest member, the US under both Obama and Trump.

I wrote a blog questioning why the OECD wasn’t working on the taxation of aviation and the tax subsidies which it enjoys.  “Why is the OECD not reviewing the taxation of aviation?” I’d asked insiders why the work wasn’t being done and they pointed to a lack of funding and “more important” projects.

The OECD is perfectly positioned to work on this subject. The zero rating of airline tickets and the exemption from fuel duty for airline fuel clearly sit within the OECD expertise. The issue of passenger duty also would fit. It is an obviously international issue in both tax and carbon.

So, if the OECD wants to “Put a big fat price on carbon”, why doesn’t it do this work on the taxing of a form of emissions which is often discretionary? On removing this carbon subsidy?

Instead that quote looks like a piece of greenwash. Do we want to put a big, fat price on all carbon? On domestic heating for instance? Or does the OECD lean towards taxation because it is part of their mandate, whereas regulation, which may be more suitable for some emissions, is more of a national competence.

© Chris Lenon and http://www.zerocarbonourchoice.com  2020-2021. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.zerocarbonourchoice.com with appropriate and specific direction to the original content.

Why is the OECD not reviewing the taxation of aviation?

I have written about the need to review the taxation of aviation given the low level or zero level of taxation. Aviation produces significant emissions, and yet as I have described in my book, Zero Carbon Our Choice, its emissions are taxed as a much lower level than other sectors, a policy framework which makes no sense and contradicts the policy of reducing global emissions to zero.

Carbon Watch has suggested “There are several options to implement a tax on aviation, ranging from taxes on fuel to ticket taxes, or per flight taxes. Independently from national measures taken, a deeper and more transparent dialogue among the Member States or clearer guidelines directly from the European Commission are required to better harmonize a possible European aviation tax.”

The European Commission has a role to play in this, but the body which has the most influence in developing global frameworks and standards is the OECD.

The most recent OECD document which a google search produces states:

“The momentum behind climate action is growing, with more countries taking action to price carbon and regulate emissions. But achieving the targets countries have set for themselves will require a sharp acceleration of effort,” said OECD Environment Director Simon Upton.


“Countries are running out of time to make the policy adjustments needed to meet their targets and keep alive the long-term goal of limiting the temperature rise to 2 degrees. Governments need to construct a policy pathway that will lead to zero net carbon emissions by the end of the century.” 2015

One might expect that the OECD would be reviewing all aspects of carbon pricing, but that is not the case with aviation emissions. There are no current projects to review aviation in both consumption and environmental taxes (there is no budget for this work). Surely, this should be a priority policy review area for the OECD as we look forward to what the economy should look like after Covid 19 and in terms of a decarbonising world economy?

OECD Headquarters

Such a review, as Carbon Watch suggests, should include:

Taxes on airline tickets or flight taxes

VAT treatment of ticket sales

VAT and treatment of airline fuels – what is the justification for zero rating?

Duty treatment of airline fuels

“Taxing aviation kerosene sold in Europe [by duty on all departing flights to all destinations of €0.33/litre] would cut aviation emissions by 11% (16.4 million tonnes of CO2) and have no net impact on jobs or the economy as a whole while raising almost €27 billion in revenues every year, a leaked report for the European Commission shows.” Airport Watch

A failure to conduct such a review would call into question how serious the OECD is about policies to reduce emissions. Now is the time to scope and start such a review. It should be an urgent priority for the leadership of the OECD.

© Chris Lenon and http://www.zerocarbonourchoice.com  2020. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.zerocarbonourchoice.com with appropriate and specific direction to the original content.