Fuel Taxation as an Economic Instrument to Tackle Climate Change

Abstract:

The world market prices for crude oil rocketed last year (November 2006 to November 2007) – rising by about 40% in euros, and by around 57% in dollars. These tremendous oil price hikes offer a unique opportunity to review the level of fuel taxation in individual countries as substantial taxation of transport fuels is a major pre-requisite for sustainable design of the transport sector with the targeted promotion of efficient settlement and production structures, the promotion of public and non-motorised means of transport and the promotion of energy-efficient vehicles and means of transport (also rail transport and shipping for long-distance transport). In that sense, the level of fuel taxation is a key governance indicator in respect to the role of the transport sector in reducing GHG-emissions and preventing climate change. This issue is relevant for Asia, as many Asian countries favour low levels of fuel taxation or even subsidize fuel prices.

Since 1998, GTZ on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) established “International Fuel Prices” as globally acknowledged prime indicator in the transport sector to provide decision-makers with data on fuel prices on a global scale.

Firstly, the presentation will describe how diffent levels of fuel prices and taxation have impact on the transport sector and on the level of GHG-emissions and differentiate by countries with subsidized fuels, with low taxation and countries with high taxation. Further, it presents concepts that mitigate the impact of rising fuel prices on vulnerable groups. Secondly, the presentation will elaborate on methodical issues for the upcoming survey in November 2008.