Energy generation, distribution and use is critical to modern economies, both as an input to industrial production and as an important element of consumer spending. At the same time, current patterns of energy generation and use contribute significantly to environmental problems such as climate change and air pollution.

This report was prepared by staff of the OECD’s Centre forTax Policy and Administration (CTPA) under the guidance of James Greene. The principal authors were Michelle Harding, Alastair Thomas, Chiara Martini (of the University of Roma Tre, who held the 2011-12 Alessandro Di Battista Fellowship in the CTPA) and James Greene. The underlying spreadsheet models were designed by Michelle Harding. An important authoring contribution was also made by Maria Grazia Pazienza of the University of Florence, who was a Visiting Research Scholar in the CTPA in 2012.

Energy use is a critical component of modern economies: it is a key input to production and an important element of consumer spending. However, many forms of energy – particularly fossil fuels – also contribute to significant environmental problems, such as climate change and local air pollution. The taxation of energy is a key policy instrument that, whether intended or not, has a significant impact on energy prices, energy usage and the resulting environmental impacts.