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Sound and independent information
on the environment

Fuel prices and taxes

Indicator 15 (and 16): Fuel prices and taxes

  • Taxes are a major component of fuel price throughout the EU. They are differentiated to encourage the use of unleaded petrol
  • There is no common trend in overall fuel tax level between Member States. Fuel taxes are therefore used to provide incentives to shift demand from leaded petrol to more environment-friendly fuels, but not generally to reduce overall fuel demand.

Figure 5.4: Price structures for leaded and unleaded petrol and diesel automotive fuel (1998)

Source: Eurostat

Objective
Promote environment-friendly fuels and reduce fuel consumption.

Definition
Fuel price and the share of tax included in fuel price.

 

Policy and targets

Motor fuel is currently subject to a number of different taxes, including VAT, excise duty, storage levies, security levies, and environmental taxes. Fuel taxes provide means for reducing demand. Differentiation in fuel taxes influences the choice of fuel (OECD, 1998).

The Mineral Oil Directive prescribes minimum fuel taxes, differentiated between leaded petrol, unleaded petrol and diesel. All EU Member States comply with this Directive and many countries impose even higher taxes. Taxation of fuels is also an important component of the overall EU transport policy to internalise all the costs of transport including environmental costs.

Several initiatives are underway in Member States to promote the use of taxes to manage other aspects of transport – for example to reduce congestion, accidents and pollution. Differentiated vehicle taxes to improve the age profile and efficiency standard of the vehicle fleet are used in the Netherlands and are under consideration in Ireland. In Germany, the first phase of an eco-tax reform took place in 1999 with an increase in fuel tax of 6 pfennig per litre – this will be similarly incremented each year until 2003. From 2001, fuel with a sulphur content of 50 ppm and over will be subject to an additional tax of 3 pfennig per litre.

Findings

Figure 5.4 shows that fuel taxes vary greatly between Member States. They account for 65-80 % of unleaded petrol price and 60-80 % of diesel prices. The tax differentiation required in the Mineral Oil Directive is reflected in fuel prices. Leaded petrol is the most expensive in all countries (4-17 % more than unleaded petrol and up to 57 % more than diesel in 1998), and diesel is the cheapest in most countries. Tax differentiation has been a major factor in phasing out leaded petrol.

A recent report from ECMT (ECMT, 1999 draft) finds that, as tax regimes vary between countries the level of fuel excise duty raised in each does not provide a reliable indicator of the extent to which infrastructure costs are being recovered.

Figure 5.5: Price of petrol and diesel automotive fuel (1998)

Source: Eurostat


The environmental performance of both petrol and diesel cars will improve when tighter standards for new cars are introduced following EU Directive 98/69 (regulating the emissions of carbon oxides, hydrocarbons, NOx and particulate matter from diesel cars) and as a result of EU Directive 98/70 (regulating diesel fuels, including sulphur content). The Directive comes into force shortly after year 2000 and will be strengthened (see Indicator 2).

Figure 5.6 shows changes in fuel prices since 1990. There are large variations between Member States, and no overall trend. In most countries prices have shown relatively little change in real terms since 1990. However, in the Netherlands and the United Kingdom real prices of all fuels have risen steadily, whilst in Greece diesel is more expensive than in 1990 (although it has fallen from a peak in 1993). Real prices have fallen in several countries, especially for diesel.

In 1998 unleaded fuel prices were highest in Finland, Sweden and Italy, and lowest in Luxembourg, Greece and Portugal. Diesel prices follow a similar pattern, except in the UK where the price is particularly high.

Fuel taxes are in many countries being supplemented with other transport taxes and charges (e.g. road pricing, Eurovignette, vehicle registration taxes, tolls). However, comprehensive harmonised data on transport taxes and charges is not available (see Box 5.2).

Figure 5.6: Fuel price evolution 1990-1998

Source: Eurostat

Box 5.2: Transport taxes and charges - the future TERM Indicator 16

In addition to fuel taxes, Member States apply various other transport taxes and charges (CEC, 1997b);

taxes associated with buying, hiring, and registering a vehicle (e.g. VAT and registration taxes);

other taxes payable in connection with the possession or ownership of a vehicle (circulation taxes and insurance taxes);

taxes directly or indirectly related to the use of vehicles (e.g. road and bridge tolls, Eurovignette).

When comparing revenues generated by transport between countries and modes, all these forms of taxes and charges must be included. However, lack of current harmonised data on these costs has made it impossible to do so in this assessment.

Figure 5.7 shows how fuel taxes have a different weight in the total burden of freight taxes and charges in each country. An increase or decrease in fuel duty will therefore have a different effect in each country. The figure is taken from a report prepared for the Federal Swiss Transport Studies Service in 1997 which provides a methodological basis for making comparisons between countries with widely differing systems of taxation. The ECMT is currently updating this methodology and extending it to rail transport and passenger transport.

The figure illustrates that some categories of freight charge are applied in all countries, for example diesel excise duty. Others (e.g. user charges such as tolls and Eurovignette) apply only in certain countries. It cannot therefore be concluded that because one country does not apply a particular charge it is under-recovering infrastructure costs, or that it might be advisable to introduce the missing charge. Finally, when comparing systems of taxation between countries, or evaluating the impact of taxes on road transport other non-transport categories of taxation (i.e. labour and capital taxation) must also be taken into consideration.

Figure 5.7: Structure of revenues from road freight transport

Source: ECMT (1999 draft), Ecosys (1998)


Future work

  • Eurostat collects price data for road transport fuel. No information is available on the price of kerosene for aviation, either from Eurostat, or from CONCAWE (the European oil industry organisation for environment, health and safety). The significant environmental impacts of aviation suggest that kerosene prices should be monitored.
  • The European Commission recently proposed a means of monitoring prices of petroleum products (CEC, 1998a).
  • It is intended to extend this indicator to cover transport taxes and charges other than fuel taxes (see Box 5.2). With the exception of fuel prices and taxes, data on transport taxes and charges is still unavailable or incomplete. It is expected that ongoing work by Eurostat/OECD (regarding statistics on environmental taxes) and ECMT (on international comparison of road and rail taxation) should soon yield the necessary data to compile TERM Indicator 16 (transport taxes and charges).

Data
Sales price of road transport fuels
Unit: ECU per 1000 litre (1990 prices)

 

Leaded petrol

Unleaded petrol

Diesel fuel

 

1990

1995

1998

1990

1995

1998

1990

1995

1998

Austria

?

-

-

?

632.9

642,6

?

508.6

511,8

Belgium

685.5

685.2

754.8

643.6

615.2

695.6

479.8

486.2

481.9

Denmark

768.6

682.7

-

634.7

662.8

704.2

557.9

541.7

528.7

Finland

?

-

-

?

890.4

1022.0

?

637.9

692.1

France

734.6

750.7

798.0

?

722.4

766.3

492.3

494.2

539.5

Germany

597.0

685.0

-

545.2

628.2

637.5

473.9

457.1

461.2

Greece

508.4

530.0

512.3

?

493.6

476.8

222.1

363.6

343.6

Ireland

782.6

720.0

750.2

758.8

669.8

641.5

682.1

633.1

610.3

Italy

943.8

925.7

866.4

996.6

864.1

820.2

605.6

679.2

641.6

Luxembourg

512.9

546.0

535.2

491.4

482.2

474.9

345.1

391.1

388.2

Netherlands

722.3

786.5

-

692.0

721.0

783.5

440.8

503.5

533.3

Portugal

720.2

586.4

569.9

?

579.0

551.3

465.4

392.2

385.0

Spain

615.0

665.7

656.0

?

630.4

622.3

452.4

487.3

490.1

Sweden

?

-

-

?

838.4

916.8

?

772.9

702.4

United Kingdom

590.8

710.2

765.9

555.6

642.1

699.9

538.4

644.4

706.1

Note: Leaded petrol is no longer sold in Austria, Denmark, Finland, Germany, Netherlands and Sweden.
Source: Eurostat

 

Price structure of road transport fuels (1998)
Unit: ECU per 1000 litre

 

Leaded petrol

Unleaded petrol

Diesel petrol

 

price excluding taxes

tax

sales price

price excluding taxes

tax

sales price

price excluding taxes

tax

sales price

Austria

-

-

-

271.6

546.8

818.5

192.9

458.9

651.8

Belgium

228.3

725.7

954.0

224.1

655.0

879.1

244.5

364.5

608.9

Denmark

-

-

-

228.4

617.1

845.5

227.4

407.4

634.8

Finland

-

-

-

226.8

727.8

954.6

256.3

390.1

646.5

France

173.7

790.0

963.7

183.3

742.1

925.4

222.2

429.3

651.5

Germany

-

-

-

208.7

605.8

814.5

209.7

379.6

589.3

Greece

213.1

513.5

726.6

223.9

452.4

676.3

203.3

284.1

487.4

Ireland

264.2

617.8

882.0

243.6

510.5

754.2

212.1

505.4

717.5

Italy

234.3

727.1

961.4

237.1

673.0

910.1

262.1

449.9

712.0

Luxembourg

230.1

489.4

719.5

226.0

412.4

638.4

172.9

348.9

521.8

Netherlands

-

-

-

250.5

713.3

963.8

195.8

460.2

656.0

Portugal

222.7

608.9

831.6

229.1

575.2

804.4

170.9

391.0

561.8

Spain

219.6

493.3

712.9

220.3

456.0

676.3

196.2

336.4

532.6

Sweden

-

-

-

245.9

700.6

946.6

203.4

521.8

725.2

United Kingdom

195.2

866.1

1061.2

193.1

776.7

969.8

216.0

762.4

978.4

Note: Leaded petrol is no longer sold in Austria, Denmark, Finland, Germany, Netherlands and Sweden.
Source: Eurostat

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