OECD urges higher carbon tax, especially on natural gas, to boost move to renewables
Noting that power generation in Israel uses highest share of fossil fuels in OECD, report says emissions from this sector are ‘strongly underpriced by international standards’
Sue Surkes is The Times of Israel's environment reporter
The OECD’s biennial report on Israel’s moves to reduce global warming gases and adapt to climate change called for steeper carbon taxes, particularly on natural gas, more stringent green building codes and the possibility of taxing carbon-emitting building materials.
Noting that Israel’s power generation uses the highest percentage of fossil fuels in the OECD, the report, published Wednesday, says emissions from this sector are “strongly underpriced by international standards.”
According to OECD estimates, only a tenth of these carbon emissions in 2021 were taxed at over 60 Euros ($65) per tonne of CO2 equivalent (tCO2e), the price estimated as necessary to achieve net-zero emissions by 2050 and a mid-range benchmark of current carbon costs in the OECD.
A carbon dioxide equivalent is a metric used to compare emissions from various greenhouse gases based on their global warming potential compared to CO2. With net-zero emissions, a balance is struck between gases that enter the atmosphere and are removed from it.
The report commended the introduction of a new carbon tax in January but said the rates are too low, particularly on natural gas, where only a gradual increase to 18 Euros ($19.4) per ton of CO2 equivalent is planned by 2030.
“Taxing all fuels according to their carbon content will penalize coal and fuel oil, which emit much more CO2 per unit of electricity generated than natural gas, accelerating their exit from the fuel mix,” the report said.
“Taxing natural gas at a rate consistent with other carbon sources will avoid over-investing in natural-gas-based power generation,” it added.
“Applying a high-enough carbon rate will encourage the deployment of carbon-free technologies such as renewables or carbon capture and storage (CCS), provided that the carbon tax offers relief if carbon capture and storage is used.”
The report said the state’s extension of the natural gas network to additional urban areas is “questionable” given that gas use in buildings should be phased out.
It proposed repealing a safety regulation that orders contractors to connect new residential buildings to liquified petroleum gas (used for cooking and in gas canisters) because of the associated carbon emissions. It warned that with the necessary shift from LPG to electricity, the regulation “will become obsolete, involving unnecessary costs.”
Turning to the emissions created by construction, the report welcomed an Environmental Protection Ministry database that calculates the environmental impacts of different construction materials, saying this could provide a basis for regulating or taxing the use of high-carbon materials.
However, it lamented that an energy performance certificate is mandatory only for new buildings, proposing that this requirement be extended for the sale of existing properties and new rentals.
The report called for more stringent green construction standards to make new buildings more energy efficient. Currently applicable to residential buildings of more than six units, they should also apply to smaller buildings, it says.
The report applauded Israel’s move to high-density urban housing, but said this needs to be better connected to planning for public transportation.
The last OECD survey of Israel was issued in April 2023.
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