The OECD has published a new report which explores how better use of energy taxes could strengthen developing countries’ finances while cutting emissions and pollution. According to the report, developing countries could raise revenues of up to one percent of GDP by increasing carbon taxes on fossil fuels.

The report considers that developing and emerging economies seeking to recover from the COVID-19 crisis would benefit from better-designed energy taxes accompanied by targeted support to low-income groups.

The report examines energy taxation in 15 developing and emerging economies in Africa, Asia and Latin America and the Caribbean. The report finds that, on average, the countries could generate revenue equivalent to around one percent of GDP if they set carbon rates on fossil fuels equivalent to €30 per tonne of CO₂.

The report also finds that five of the 15 countries do not use any coal and the use of wind and solar energy is growing fast. The report notes that 13 of the 15 countries have experience with fuel excise taxes, meaning carbon tax reform would be relatively straightforward to implement in administrative terms.

More information can be found in the OECD’s update on their website.