Fuel for thought

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A litre of diesel has around 10% more combustion energy than petrol, but produces roughly 18% more CO2 emissions. 

Yet, when taken as tax per unit of energy produced, the average effective tax rate on diesel is 32% lower across OECD countries than it is on petrol.

In fact, the US–where tax rates on both diesel and petrol (or gasoline as it is called in the US) are very low anyway–is the only OECD country where diesel is taxed more than petrol on a per-unit of energy basis.

With regard to combating climate change, this tax policy makes little sense, not least because the lower tax amounts to a hefty subsidy to diesel. To be sure, taxing both fuels equally with regard to carbon emissions would mean that taxes on a litre of diesel should be 18% higher than those for petrol.

©OECD Yearbook 2014 

Read more at www.oecd.org/forum/oecdyearbook/

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