Bridging the gap: Fiscal reforms for the low-carbon transition

Fiscal policies can affect fossil fuel prices and therefore influence carbon emissions and investments in the energy sector. However, current price signals from excise taxes and carbon pricing are too low and inconsistent to encourage strong and cost-effective mitigation. In some countries, and for some fuels, carbon prices are even negative due to high financial support for fossil fuels. This chapter assesses the fiscal policy gap between current fiscal policy and its potential for reducing carbon emissions and collecting public revenue. It provides country examples and further considerations of how to overcome this gap.

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