More information on environmentally related taxes, fees and charges

It is important to be aware that the nominal tax rates described in some of the queries do not provide the full picture concerning how different tax-bases are taxed. In most cases, the respective taxes, fees and charges include important exemptions, refund mechanisms, etc. Thus, queries describing these mechanisms should also be consulted before any conclusions concerning "effective tax rates" are drawn.

Definition of environmentally related taxes

This database defines environmentally related taxes as any compulsory, unrequited payment to general government levied on tax-bases deemed to be of particular environmental relevance. Taxes are unrequited in the sense that benefits provided by government to taxpayers are not normally in proportion to their payments.

Requited compulsory payments to the government, such as fees and charges that are levied more or less in proportion to services provided (e.g. the amount of wastes collected and treated), are also included in the database. The term levy can be used to cover both taxes and, fees and charges. The queries maintain a clear distinction between taxes and fees/charges, but in this introduction, and in the names of the queries, the term "taxes" sometimes includes both taxes and, fees and charges.

The primary focus of the database is on pollution-oriented levies and tax-bases, but levies related to certain categories of resource management have also been included. The tax-bases covered include energy products, transport equipment and transport services, as well as measured or estimated emissions to air and water, ozone depleting substances, certain non-point sources of water pollution, waste management and noise, in addition to the management of water, land, soil, forests, biodiversity, wildlife and fish stocks.

The name, or the expressed purpose, of a given tax is not a criterion in this database. The focus is instead on the potential environmental effects of the given tax, which is determined by the tax impacts on the producer and consumer prices in question, in conjunction with the relevant price elasticities.

Total revenues from environmentally related taxes

The three graphs below show total revenues from environmentally related taxes in per cent of GDP, total tax revenues and per capita in OECD member countries respectively. In these graphs, revenues from fees and charges are not included. The graphs should be interpreted with caution -- and in conjunction with the queries that provide details on the taxes in the various countries. Few -- if any -- inferences concerning the "environmental friendliness" of the tax system in the countries can be drawn from the graphs below alone. For instance, low revenues from the taxes in question could either be due to little use of environmentally related taxes, or due to broad use of such taxes, where high tax rates have caused significant changes in behavioural patterns among producers and consumers (e.g. reduced emissions).

Similarly, high revenues per capita can in some cases be caused by foreign persons purchasing significant amounts of a taxed product in the country in question because the tax rates there are lower than in neighbouring countries. Also, the share of revenue from environmentally related taxes in total tax revenue is influenced by the extent of taxation of non-environmentally related tax-bases. Further details concerning the actual design of each of the taxes can be found through the queries on the database homepage.

If you click on the graphs below, you can see a PDF file that contains the underlying data for each of the years 1994-2010.

The countries are sorted according to the values in 2010. For Canada, Greece and the Slovak Republic, 2009 values are used.

The countries are sorted according to the values in 2010. For Canada, Greece, the Netherlands, Poland and the Slovak Republic, 2009 values are used.

The countries are sorted according to the values in 2010. For Canada, Greece and the Slovak Republic, 2009 values are used. The amount of revenues collected, measured in national currencies, was corrected for inflation, using the respective the GDP deflators, and converted to USD, using GDP-based purchasing parity-adjusted exchange rates.

Reasons for the relative decline in tax revenue from environmentally related taxes

From the first graph above one could see that the revenues from environmentally related taxes declined on average in OECD countries in recent years when measured in per cent of GDP. The graph below shows the development of the arithmetic and weighted average of this indicator for each of the years between 1994 and 2010. Further analysis indicates that the decline in revenues from environmentally related taxes measured against GDP up to 2008, and from 2009 to 2010, is related to a decline in the use of petrol per unit of GDP in OECD countries in this period.

The graph below illustrates clearly that developments in the share of revenues from environmentally related taxes in GDP are closely linked to developments in international prices of motor vehicle fuels -- exemplified here by the whole-sale price of petrol in Rotterdam. High international fuel prices cause substitution away from use of such fuels, and as motor fuels are taxed more heavily than most other goods and services, this contributes to a reduction in the revenues from environmentally related taxes as a share of GDP. The graph also illustrates that when international fuel prices decreased significantly from 2008 to 2009, the revenues stemming from taxes on energy products (including motor vehicle fuels ) increased significantly.

This was to some extent counteracted by a reduction in revenues stemming from motor vehicles and transport ( excluding motor vehicle fuels ), probably in response to the economic crisis, which made many people refrain from making major capital investments. Motor vehicle purchases were stimulated by various car scrapping schemes in some countries (e.g. France, Germany, the United Kingdom and the United States), but in these (car producing) countries few, if any, taxes are levied on motor vehicle purchases in any case.

The graphs below illustrate developments revenues from environmentally related taxes, by tax-base, in per cent of GDP, with a common vertical scale (with a few exceptions, highlighted in yellow) (For example, in Mexico, the system used to stabilise end-user prices of motor fuels causes tax revenues to turn negative in years with high world-market prices for such fuels). By clicking on an image, you can see larger versions of the respective images.

The focus of the graphs below is in particular the amount of revenue raised on energy-related tax-bases (the blue parts of the bars). Develoments over time in these revenues are, among several other factors, indirectly influenced by the prices various users of energy products are facing (which impacts on the share that energy products will play in total consumption). The end-user prices are much affceted by the international fuel prices (here exemplified by the Rotterdam price of petrol), and by the tax rates applied on the different products.

As mentioned above, higher international fuel prices (and thus higher end-user fuel prices) cause substitution away from the use fuels, and in all OECD countries, this has in isolation contributed to a reduction in the revenues from energy taxes measured in per cent of GDP. In some countries, this tendency has been counteracted by real increases in the fuel taxes (exeplified in the graphs by the real tax rates on petrol) -- for a longer or shorter period. Examples include Estonia, Germany, Turkey and the United Kingdom. In other cases, the negative impact on energy tax revenues from higher fuel prices has been augmented by real (and, in a few cases, even nominal) reductions in the fuel tax rates. Examples include Australia, Canada, France, Greece, Italy, Spain --and, to an extreme extent, Mexico.

While these graphs allow an analysis of impacts of changes in the tax rates and fuel prices over time, another set of graphs further below also highlights the impacts of different levels of fuel tax rates across countries.

The next graph, based on data from IEA's Energy Balances of OECD Countries (2010 preliminary edition) and IEA's Energy Prices and Taxes database, similarily illustrates the use of petrol, diesel and other motor fuels in the transport sector per unit of GDP in OECD as a whole. The graph also illustrates the development of the (pre-tax) Rotterdam spot market price of petrol. The strong increases in market prices for petrol from 1998 to 2000, and from 2003 to 2008, contributed significantly to a lower use of petrol in particular per unit of GDP. Between 1994 and 2008, petrol use per unit of GDP decreased almost 30% in OECD as a whole -- while diesel use per GDP unit increased less than 1%.

While 39.0 tonnes oil equivalents of petrol, diesel or other transport sector fuels were used per GDP unit in 1994, 32.9 tonnes were used in 2008, a decrease of 15.8%. In response to the strong decrease in fuel prices from 2008 to 2009 (-27%), energy use in the transport sector per unit of GDP again increased about 1% between these years. Given that the tax rate of petrol is on average 20-25% higher than the tax rate for diesel, the shift from petrol to diesel use also contributes significantly to reduce the revenues from fuel taxes in per cent of GDP.

The impact on the tax revenues of the price increases up to 2008 was strengthened further by a slower-than-before increase in the fuel taxes after 2000, especially as regards petrol. For example, while the average petrol tax rate in OECD countries increased 3.3% per year between 1994 and 2000, the average nominal petrol tax rate in 2009 was the same as in 2000. (In these calculations, the tax rates in individual countries have been weighted together using the share of total OECD PPP-corrected GDP as weights.)

The graphs below illustrates similar developments for each of the OECD member countries -- in alphabetical order. For ease of comparison, the scales of the two verical axes have been kept constant across all the graphs. By clicking on one of the small pictures, you can see a larger version of each graph.

A large number of observations can be made based on these graphs, but the clearest message is probably that "price mechanisms work" -- both in the short and in the longer term. For example, if one compares the countries with relatively high taxes on motor fuels (Turkey, United Kingdom, Sweden, Norway, Germany, ...) with countries with low motor fuel taxes (United States, Canada, ...), one can clearly see that the in former group of countries, the level of transport fuel use per unit of GDP is much lower than what is the case in the latter group of countries. One can also see that in most countries, increased taxes and/or higher pre-tax fuel prices have contributed to significant improvements in the transport fuel efficiency of GDP over the periode in question. This tendency was to some extent counteracted in some of the lower-income countries (Czech Republic, Hungary, Poland, Portugal, Slovak Republic, ...), where both the professional transport sector and the ownership of passenger cars were still under development. Mexico is a special case, because end-user fuel prices have been kept largely stable, despite the rising world market crude oil prices.

Another observation is that countries with little or no tax preference for diesel over petrol (Switzerland, United Kingdom, United States, ...), the share of diesel use in total transport sector fuel use is lower than in other countries. Luxembourg is a somewhat special case, where lower tax rates than in neighbouring countries contribute to a large amount of "tank tourism", making fuels sales per unit of GDP particularly large. Finally, in countries where fuel taxes were significantly increased over a certain time period (Turkey, Germany, ...), one can relatively quickly see an impact on the motor fuel efficiency of GDP.

The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.