Aligning taxation of energy more closely with environmental externalities and
eliminating tax exemptions for environmentally harmful behaviour would also contribute
to reducing local pollution which is harmful for human health.
As in other OECD countries
estimated mortality from outdoor air pollution is high (Figure 20). The cost of mortality
induced by air pollution is estimated at 5% of GDP (OECD, 2014d). Diesel is taxed less than
petrol, even though analysis suggests it should be taxed more because it is more polluting.
Many cities in Germany have high levels of NO2 emissions, in part because of diesel cars.
The introduction of stricter pollution standards for cars has not lowered emissions (Löschel
et al., 2014). Raising diesel taxes and taxing cars according to their Nox emissions could do
better. Sweden also tackled Nox emissions by taxing large emitters.