Published (reviewed and quality assured)
Justification for indicator selection
An increase in fuel prices can result in a decrease in fuel and transport demand, and greenhouse gas emissions, thereby leading to a decrease in pressures on the environment. Several different estimates on the price elasticity of demand for fuel have been made. Goodwin et al. (2004), for example, estimated an elasticity of 0.6, i.e. a 10 % increase in fuel price would lead to a 6 % decrease in fuel demand.
Fossil fuel consumption is directly linked to emissions of carbon dioxide (CO2) (a primary greenhouse gas). Links between fuel consumption and other pollutants (e.g. Nitrogen oxides (NOX), hydrocarbons (HC), particulate matter (PM), etc. and noise) depend on the vehicle technology used (i.e. EURO standards and noise classes, type of engine and fuel needed) and trip conditions, as well as the type of fuel.
Fair and efficient transport pricing is a crucial precondition for sustainable transport. It implies that users pay for the full (environmental and social) costs of transport. Therefore the price and tax levels of fuel are important for three key reasons:
- Fuel taxation is an instrument that serves different policy objectives; one possible use is to internalise external costs. If prices and transport duties (including fuel taxes) covered all social costs, the demand for transport would be economically optimal for the welfare of society as a whole, since prices would reflect all health, environmental and infrastructure costs. However, fuel taxes are not the only way towards fair pricing (e.g. kilometre charging or vehicle regulation);
- Higher fuel prices act as incentives to reduce fuel consumption, e.g. through the purchase and use of more fuel efficient vehicles, a shift to non-motorised or public transport modes, fewer trips, and less motorised transport-orientated patterns of settlements; and
- Differentiated fuel taxes can stimulate a shift towards cleaner fuels, for example electricity or sustainable biofuels.
- EC, 2006. 'Keep Europe Moving - Sustainable mobility for our continent'. Mid-term review of the transport White Paper, published in 2001 by the European Commission: Communication from the commission to the Council and the European Parliament of 22 June 2006. COM (2006) 314 final.
- Goodwin, P., Dargay. J. and Hanley, M., 2004. Elasticities of road traffic and fuel consumption with respect to price and income: a review. Transport Reviews, 24(3), 275-292
- EC, 2001. 'European transport policy for 2010'. White Paper on European transport policy for 2010: time to decide. COM (2001) 370 final.
- Roadmap to a Single European Transport Area – Towards a competitive and resource efficiency transport system White Paper on European transport policy. COM (2011) 144 final.
This indicator considers the price of fuel in the EU, including the cost price, excise duty and VAT.
- ‘All petrol’ is a consumption-weighted average price of both leaded and unleaded fuel, corrected using energy-content to the equivalent amount of unleaded petrol.
- ‘All fuel, unleaded petrol equivalent’ is a consumption-weighted average price of unleaded and leaded petrol, and diesel, corrected using energy content to the equivalent amount of unleaded petrol.
- ‘Nominal’ is the price with no adjustment for inflation.
- ‘Real’ is the price corrected for inflation, using 2005 as the baseline year.
- ‘Average, all fuel, unleaded petrol equivalent (real, weighted by consumption)’ is the consumption-weighted average of the ‘All fuel, unleaded petrol equivalent (real)’ line across the full time series.
The units used in this indicator are Euros per litre.
Policy context and targets
Fair and efficient transport pricing is a crucial precondition for sustainable transport. It implies that users pay for the full (environmental and social) costs of transport. Therefore the price and tax level of fuel are key variables to monitor.
Fuel taxes are the subject of a variety of EU initiatives. The European transport White Paper (EC, 2001) proposed to "harmonise excise duty on diesel for commercial uses, which in practice would be higher than the current average tax on diesel". The aim of this harmonisation is to achieve better internalisation of external costs. Harmonisation also aims to improve the internal market by establishing level playing field for shippers from different EU Member States and create more stable prices in road transport. However, a 2002 Commission proposal to do so was rejected by the Council. The proposal resulted in decreases in excise duty incomes for several countries, up to 50 % in the UK, while transport organisations argued against fuel tax revision. More recently, in the European transport White Paper of 2011 (EC, 2011), the Commission proposed to “revise motor fuel taxation with clear identification of the energy and CO2 component” by 2016.
However, to date, fuel taxation is not generally used to internalise the environmental externalities of transport, possibly because high fuel tax is not often politically viable. A new proposal to revise the Energy Tax Directive was presented by the Commission in 2011. It aimed at restructuring the taxation of energy products (including those used in aviation), in order to remove current imbalances and distortions, and support the EU's wider environmental and energy goals. However, following unsuccessful negotiations between EU Member States in the Council, the proposal was withdrawn by the Commission in 2015.
The 2011 Transport White Paper suggests that EU motor fuel taxation should be restructured, to clearly identify the energy and CO2 components.
Related policy documents
COM (2001) 370 final. European transport policy for 2010.
WHITE PAPER European transport policy for 2010: time to decideCOM (2001) 370 final
'Keep Europe Moving – Sustainable mobility for our continent'. Mid-term review of the Transport White Paper, published in 2001 by the European Commission: Communication from the Commission to the Council and the European Parliament of 22 June 2006. COM (2006) 314 final
‘Proposal for a council directive amending Directive 2003/96/EC as regards to the adjustment of special tax arrangements for gas oil used as motor fuel for commercial purposes and the coordination of taxation of unleaded petrol and gas oil used as motor fuel
COM(2010) 2020 final, Europe 2020: A strategy for smart, sustainable and inclusive growth
European Commission, 2010. Europe 2020: A strategy for smart, sustainable and inclusive growth. COM(2010) 2020 final.
Council Directive 2003/96/EC
Restructuring the Community framework for the taxation of energy products and electricity. EU, 2003.
Transport White paper 2011
Roadmap to a Single European Transport Area - Towards a competitive and resource efficient transport system
Key policy question
Are fuel prices leading to decreased pressures on the environment?
Methodology for indicator calculation
Fuel prices and taxes are presented weekly in a DG ENERGY Oil Bulletin (prior to 2006, data was also presented in a monthly format). Information is available for each of the EU Member States (including the EU-10 from mid-2004, and Bulgaria and Romania as of January 2008). Fuel prices are corrected for inflation using the Harmonised Indices of Consumer Prices (HICP) for each Member State. Prices are then weighted by fuel consumption to calculate an EU-28 average.
As leaded petrol was replaced by unleaded petrol during the period studied, an unleaded equivalent price has been calculated. This is a consumption weighted average, corrected for the slightly different energy content of the two fuels.
Methodology for gap filling
No methodology for gap filling has been specified.
- DG ENER Oil Bulletin To improve the transparency of oil prices and to strengthen the internal market, the European Commission's Oil Bulletin presents weekly consumer prices for petroleum products in EU countries.
EEA data references
- No datasets have been specified here.
Data sources in latest figures
There is little uncertainty in the methodology used. However, information on annual fuel consumption is not currently available.
Prior to 2006, quarterly data were used, i.e. 15/01, 15/04, 15/07, and 15/10. After 2006, weekly data have been published. The HICP is only makes monthly data available, so the same HICP is used for every fuel price data point in each month. Consumption data are available annually, so calculations for the weighted average price by consumption uses the same consumption data for every week in a given year.
Data sets uncertainty
Information on fuel prices and taxes is considered to be a reliable data set.
No uncertainty has been specified
Short term work
Work specified here requires to be completed within 1 year from now.
Long term work
Work specified here will require more than 1 year (from now) to be completed.
Work descriptionFurther work related to fuel prices and taxes could include gathering information and data on other transport fuels, such as jet fuel, marine fuels, rail diesel and electricity taxes, or even alternative fuels such as biofuels, LPG and natural gas (CNG, LPG). However, in most cases this information is not collected centrally by bodies such as Eurostat and can be difficult to obtain from other sources.
No resource needs have been specified
Deadline2017/12/31 00:00:00 GMT+1
Responsibility and ownership
EEA Contact InfoDiana Vedlugaite
Frequency of updates
ClassificationDPSIR: Driving force
Typology: Descriptive indicator (Type A - What is happening to the environment and to humans?)
For references, please go to www.eea.europa.eu/soer or scan the QR code.
This briefing is part of the EEA's report The European Environment - State and Outlook 2015. The EEA is an official agency of the EU, tasked with providing information on Europe's environment.
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