Suzi Tart, OECD Environment Directorate
The current Volkswagen diesel emissions scandal highlights the difficult reality of making the transition to a low-carbon economy. It also highlights the growing need for governments to make smart policies, based on actual costs.
One might think air pollution is not a big problem because in most cases we can’t see or smell it until it reaches a critical level. Data shows that we should be concerned. Health costs from outdoor air pollution in OECD countries in 2010 amounted to $1.7 trillion. Of that amount, road transport accounted for nearly $1 trillion. Outdoor air pollution not only takes away from the quality of one’s life, it also kills. The number of premature deaths due to outdoor air pollution is estimated to be around 3.3 million each year. The growth in vehicles being added to the streets in China and India mean that this figure is on an upward trend worldwide, although it has been declining in many OECD countries due to emissions controls on vehicles.
Car companies such as VW that are cheating the system therefore risk derailing the modest progress that has been made. Tighter emissions standards for vehicles in OECD countries were a step in the right direction; yet as we have learned, one step is not enough to get us to our destination. Policymakers had no doubt hoped to encourage innovation and investment in clean fuels with such measures. Rather than losing hope however, governments should maintain their strong regulatory regimes and emissions controls. They can also help unlock the potential market power for clean fuels by supporting more research and development in this field, as well as implementing wise tax structures.
Diesel is an example of an unwise tax. Diesel-fuelled engines are considered to be more damaging to both the environment and human health than gasoline-fuelled ones. Yet diesel has a lower tax rate than gasoline does in most OECD countries. Many people fear that diesel-fuelled cars outside of the US will also be found to have “defeat devices” installed on them. If that is indeed the case, at least some of the damage inflicted on our environment and health presumably could have been avoided. Had tax structures properly reflected the degree of environmental and social costs, the higher tax on diesel would have yielded a lower demand for diesel-fuelled cars, hence fewer consumers would be driving them today.
While the world waits to see just how many cars are cheating the system, citizens continue to suffocate and Earth continues to overheat. Transitioning to a low-carbon economy will not be easy, but with the right mix of policies, it can be achieved.
Avoiding death by diesel, Simon Upton, OECD Insights