On climate, Israel is at a critical crossroads

The latest Organisation for Economic Co-operation and Development (OECD) Economic Survey of Israel, released Wednesday, highlights a stark reality: Israel is not on track to meet our climate goals and international commitments. This finding by the international organization founded in 1961 to promote policies that improve the economic and social well-being of people around the world (*) highlights not just an environmental failure – but an economic and strategic one as well. If Israel does not take bold action now, we will remain behind as most countries reform their economies by increasingly switching to renewable energy or electric vehicles. Lagging behind risks our economic competitiveness, undermines national resilience, and deepens the burden on future generations.

Israel is therefore at a critical crossroads in its climate and energy policy. But it is not too late for a change. The government must deploy stronger policy tools, regulatory mechanisms, and targeted investments to bridge the growing gap between commitments and reality. Climate action cannot remain a secondary concern; it must be at the core of Israel’s economic and infrastructure planning. The necessary measures are clear, and the time to act is now.

A Carbon Tax That Works

One of the most critical tools at the government’s disposal is carbon pricing. The OECD report makes it clear: Israel’s current carbon tax, particularly on natural gas, is far too low to drive meaningful change. Without a strong economic signal, businesses and consumers will continue to rely on fossil fuels, delaying the transition to clean energy.

Additionally, Israel’s export industry will face higher costs as other countries implement border taxes to level the economic playing field.

Raising the carbon tax significantly – and doing so with a predictable, long-term trajectory – will provide the certainty needed for investors to shift toward renewables and energy efficiency. At the same time, it is essential to ensure that the policy does not disproportionately harm low-income households. A portion of the revenue from carbon pricing should be reinvested in social programs, such as subsidies for energy-efficient home improvements and public transportation.

Climate Law

The OECD notes that a climate bill, which includes a legally binding target of net-zero emissions by 2050, passed its first reading in the Knesset in April 2024. However, its legislative progress has since stalled. Passing and enacting this law is not just a formality; it is a critical step in signaling long-term national commitment, providing legal certainty for businesses and investors, and ensuring accountability across government sectors. A robust climate law would establish clear mandates, timelines, and institutional frameworks to guide implementation. As the OECD makes clear, reaching net-zero requires “considerable action beyond business-as-usual.” Without a legal backbone, climate policy in Israel risks remaining fragmented and vulnerable to short-term political shifts.

The Building Sector: A Missed Opportunity?

The building sector has taken center stage in the OECD’s findings – not only because of its massive carbon footprint, but also due to Israel’s ongoing housing crisis. Buildings account for 71% of the country’s electricity consumption, yet policies to improve energy efficiency and incentivize green construction remain inadequate. The OECD explicitly recommends mandating energy performance certificates for existing buildings, not just new ones, and updating green building standards to require strong energy performance for all types of new buildings, including private homes and small structures. These reforms are essential to reduce emissions, lower electricity bills, and improve housing quality amid a national affordability crisis.

This is a major opportunity. Strengthening green building codes, making energy performance certificates mandatory for property transactions, and launching large-scale retrofitting programs can simultaneously reduce emissions, lower electricity bills, and increase housing quality. The government must integrate energy efficiency into its broader strategy to address the housing crisis. Every new building constructed today without sustainable design locks in decades of unnecessary carbon emissions and higher energy costs for residents.

Climate Action is National Security

Israel faces significant geopolitical challenges, and energy security is a fundamental concern. Distributed renewable energy, storage solutions, and smart grids can reduce dependence on fossil fuels, strengthen resilience against supply disruptions, and decrease vulnerability in times of crisis. Energy independence is national security, and failing to prioritize this transition puts Israel at risk.

Additionally, climate-related disasters – heatwaves, droughts, and rising sea levels – are becoming more frequent and severe. The government must accelerate climate adaptation efforts, including mapping climate risks, strengthening urban flood management, and integrating resilience planning into national infrastructure projects.

The Cost of Inaction

Critics argue that aggressive climate policies could slow economic growth, but the reality is the opposite: inaction is far more costly. A failure to meet our climate commitments could result in international trade repercussions, as more countries implement carbon border taxes. Delaying investments in clean energy and efficiency will only lead to higher costs down the line as global markets shift away from fossil fuels.

The OECD report makes it clear that climate policy is not just about reducing emissions – it is about strengthening Israel’s economic resilience, creating jobs in the green economy, and ensuring long-term prosperity. Every delay in climate action is a missed opportunity to position Israel as a leader in clean technology and sustainable development.

A Call to Action

The Israeli government must move beyond symbolic commitments and implement bold, systemic reforms to drive real progress. That means significantly raising the carbon tax, enforcing stronger efficiency standards in the building sector, and prioritizing investment in renewables and energy storage. It also means integrating climate considerations into all aspects of economic planning, from infrastructure to finance.

Israel has the innovation, talent, and resources to lead in the global fight against climate change. But leadership requires action, not just words. The time to act is now – before the gap between rhetoric and reality becomes unbridgeable.

* The OECD provides a forum for governments to collaborate, share experiences, and seek solutions to common challenges, and it produces data, analyses, and policy recommendations across a wide range of topics including economics, education, environment, taxation, and governance. Israel became a member of the OECD in 2010.