Fossil fuel subsidies up, carbon pricing too low: OECD

No major economy in the world has carbon pricing policies even remotely in line with the Paris climate treaty goal of capping global warming at 1.5 degree Celsius, the OECD said Tuesday.

In a scoring system where 100 points correspond to trading schemes and taxes that curb greenhouse gas emissions enough to achieve carbon neutrality by 2050 -- a target consistent with the 1.5C cap -- 44 nations accounting for 80 per cent of global carbon pollution scored 13 on average.

For 2018, a dozen European nations had marks between 38 and 48, while the US earned 11 points, China 5, with Brazil and Indonesia rating only 1.

Government subsidies for the production and use of fossil fuel, meanwhile, rose by five per cent in 2019 compared to the year before across 50 nations to $178 billion (152 billion euros), the intergovernmental organisation of wealthy nations reported.

Oil, gas and coal subsidies worldwide undermine the transition to a carbon neutral global economy.

"That trend seems set to have continued in 2020 ... as governments have sought to shore up fossil fuel and related industries in Covid-19 recovery packages," especially in North America, the OECD said in a statement.

Putting a price on carbon is a crucial lever for drawing down emissions that are already creating havoc across the planet.

Policies that recognise the true social cost of fossil fuel pollution -- on health, productivity and the environment -- make renewable energy such as solar and wind more competitive and hasten the transition to low- or zero-carbon economies.

They also show investors that it pays to sink money into green technology and infrastructure.

To quantify the extent to which countries have used emissions trading schemes, carbon taxes, and fuel excise taxes to reduce their energy-related carbon emissions, OECD economists developed a carbon pricing score.

The rating system assumes that each euro per tonne of CO2 levied on carbon pollution -- via a carbon tax, for example -- should eventually lead to a 0.73 per cent reduction in emissions.

The EU Emissions Trading Scheme (EU ETS) provides a real-world test.

From 2018 to 2019, permit prices in the EU ETS jumped from 16 to more than 25 euros per tonne of CO2.

At the same time, overall emissions decreased by almost nine per cent, roughly consistent with the OECD's underlying assumptions.

In Britain, a 30-euro per tonne increase in so-called "effective carbon rates" in the electricity sector over six years saw emissions in the sector fall by more than 70 per cent during the same period.

Also read: Can India achieve zero-emission by 2050?

The OECD measured the effectiveness of a country's policies against one of three benchmarks, corresponding to different levels of carbon-cutting ambition.

But only the most ambitious of the three -- pegged to an economy-wide carbon price of 120 euros per tonne of CO2 by 2030 -- is consistent with the goal of limiting the rise in global temperatures to 1.5C above preindustrial levels.

Average warming of just over 1C so far has amplified the deadly impact of heatwaves, flooding and storms made more destructive by rising seas.

Measured against this 120-euro benchmark, only two of 44 countries -- Luxembourg and Switzerland -- scored above 50, with another 10 European nations logging a carbon pricing score of 38 to 48.

While China's score is low, it is poised to improve rapidly.

"The introduction of a national emissions trading scheme in 2021 will increase its carbon pricing score significantly," the report said.

China's Emissions Trading Scheme currently covers some 3.6 billion tonnes of annual carbon emissions from its electricity sector -- equivalent to the EU's total emissions.

If Beijing folds in other polluting sectors, such as industry, its score will go up even more, the OECD said.