Last Friday, youth from all over New Zealand went on strike for climate change. In the UN, the climate and environment activist, Greta Thunberg, stood and asked for change. What do you ask, do either of these events have to do with tax?
Taxes are used, rightly or wrongly, for a variety of reasons by the government. Their purpose at a government level is not simply revenue but to change behaviour and perception. How is tax being used in the world of climate change?
The OECD recently released a report on the subject of “taxes on polluting fuels being too low”. Did you know? Taxes on Coal and Fuel for international flights and shipping are zero or close to zero in most countries. These two factors together contribute to almost half of CO2 emissions for energy. Often, taxes on natural gas are higher compared to polluting fuels. Because of this, there is little to no incentive for people to shift to cleaner energy. Even though energy taxes are not the only solution to slow down climate change, it is apparent that we cannot do it without energy taxes.
The report states that tax policy will need to be improved in order to give a fair chance to low-carbon technologies. Additionally, long-haul frequent flyers and cargo shipping firms should be paying their fair share of tax. The report focuses on three types of energy taxes including; fuel taxes, carbon taxes and taxes on electricity use. Tax revenues resulting from tax reforms should be used to assist vulnerable households with the low-carbon transitions. Extra tax revenues can be used for social purposes.
Reducing carbon emissions comes at a cost, and the benefits may not show for two or three decades. Do you think this is worth the wait?