Economic support for green commodities and fuels: Taxation

Current status of implementation and existing gaps

Many countries have started offering fiscal support in the form of tax benefits to stimulate market uptake of electric trucks, but these benefits vary widely.

Examples and initiatives

In the Kingdom of the Netherlands, a levy on fossil fuel trucks – of, on average, EUR 0.17/km – is estimated to yield EUR 1.6 billion from 2026 to 2030, of which EUR 980 million will go to purchase subsidies for zero-emission trucks.

China has extended its 10% purchase tax waiver for new energy vehicles (battery electric, plug-in hybrid electric, fuel cell electric) through 2027, which applies to trucks.

Current status of implementation and existing gaps

Like subsidies, tax credits can help bridge the gap in costs between conventional fossil fuel and low-carbon marine fuel. The implementation of such incentives should be sustained long enough to promote cost reductions through technological advancements.

Examples and initiatives

The Inflation Reduction Act (IRA) provides tax credits for the production of various low-carbon fuels. These credits cover biofuels, clean hydrogen, carbon capture, and more. Certain hydrogen derivatives, such as e-ammonia and e-methanol, which are emerging marine fuels, receive additional multipliers to encourage their production.

Current status of implementation and existing gaps

Tax credits can also be a useful instrument to cover the cost premium of SAF over conventional jet fuel. Credits can also be used to build support infrastructure such as blending and storage terminals.

Examples and initiatives

The Internal Revenue Service offers an SAF tax credit of USD 1.25 per gallon in a qualified mixture, provided the SAF reduces life cycle GHG emissions by 50%. An additional USD 0.01 per gallon of credit is available for each percent over 50%.

Current status of implementation and existing gaps

Tax credits have been offered for broader renewable power projects for decades and have recently been revised and expanded to green hydrogen production in many regions. For green steel production specifically, tax deductions are offered in some major markets, such as Japan.

Examples and initiatives

Notable examples include Brazil’s hydrogen tax credits; Canada’s and the United States’ hydrogen production tax credits; and Japan’s preferential tax system, which offers a tax deduction to companies producing steel of JPY 20 000 (USD 140) per tonne of production and sales, capped at 40% of corporate tax liability until 2030.

Current status of implementation and existing gaps

Tax credits have been offered for broader renewable power projects for decades and have recently been revised and expanded to green hydrogen production, mainly in Brazil, Canada, Europe and the United States.

Examples and initiatives

Notable examples include the federal tax credits for clean hydrogen production in Canada under the Clean Hydrogen Investment Tax Credit.

Current status of implementation and existing gaps

Tax credits have been offered for broader renewable power projects and industrial production (OECD, 2023b). The use of tax credits has recently expanded to green industrial transformation in many regions. Tax deductions are offered for low-clinker cement in some major markets.

Examples and initiatives

Previously, Portland cement had a lower commodity tax in Taiwan Province of China, but after advocacy, the commodity tax for low-carbon cement is now lower than for Portland cement, which benefits the expansion of the low-carbon cement market and promotes the low-carbon transition of the cement industry (GCCA, 2024).