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Indicator Specification
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 of 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.
Fuel taxation, therefore, is a potential instrument for reducing emissions from transport. In particular, it represents the best charge structure for internalising climate change related externalities, as fuel consumption (factoring carbon content of fuel) is an excellent proxy for greenhouse gas emissions. The European Commission is aiming to achieve fair and efficient pricing of transport (European Commission, 2006), which implies that transport charges should aim to reflect the external costs of transport. However, to date fuel taxation is not generally used to internalise the environmental externalities of transport, possibly because high fuel tax is often politically unviable. Phase I (from 2011 to 2016) of the European Commission’s transport White Paper strategy (2011) indicates that motor fuel taxation should be revised to take account of the energy and CO2 component. Some Member States do, however, reduce taxation on fuels that have low life-cycle emissions.
Policies favouring the uptake of diesel fuel have succeeded in increasing diesel consumption over petrol for use in road transport. Largely, these policies were put in place in Europe because of the improved fuel efficiency (and reduced CO2 emissions) that are attributed to diesel fuels. Unfortunately, the environmental disadvantages associated with diesel fuels were not fully realised until long after the policies were put in place. As recognised in ‘Tax Reforms in EU Member States 2014’ (EC, 2014), specific measures could be introduced such as adjusting the level and structure of fossil fuel excise duties so as to reflect the carbon and energy content of the fuels, and indexing environmental taxes to inflation.
This indicator considers the price of fuel in the EU, including cost price, excise duty and VAT.
Definitions:
Fuel prices include cost price, excise duty and VAT and are expressed in Euros per litre.
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:
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 a level playing field for shippers from different EU Member States and creating 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. Also transport organisations argued against fuel tax revision. More recently in the European transport White Paper of 2011 (EC, 2011), the Commission has proposed to 'revise motor fuel taxation with clear identification of the energy and CO2 component' by 2016.
EU minimum levels for road fuel taxes are set out in Council Directive 2003/96/EC on the taxation of energy products. As a result, the minimum excise duty for unleaded petrol increased from EUR 287 to EUR 359 per 1 000 litres. For diesel fuel, the minimum rate increased from EUR 245 to EUR 302 per 1 000 litres in 2004, and up to EUR 330 per 1 000 litres in 2010 (EC, 2007).
The EC’s 'Europe 2020' strategy (EC, 2010) includes a positive approach to energy taxes and greening transport: 'where taxes may have to rise, this should, where possible, be done in conjunction with making the tax systems more 'growth-friendly'. For example, raising taxes on labour, as has occurred in the past at great cost to jobs, should be avoided. Rather, Member States should seek to shift the tax burden from labour to energy and environmental taxes as part of 'greening' of taxation systems'.
The 2011 Transport White Paper suggests that EU motor fuel taxation should be restructured to clearly identify the energy and CO2 components.
Fuel prices and taxes are presented weekly in a DG Energy Oil Bulletin (prior to 2006, data were 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 equivalent price for unleaded fuel has been calculated. This is a consumption weighted average, corrected for the slightly different energy content of the two fuels.
No methodology for gap filling has been specified.
No methodology references available.
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 only makes monthly data available, so the same HICP index 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 use the same consumption data for every week in a given year.
Information on fuel prices and taxes is considered to be a reliable data set.
No uncertainty has been specified.
Work specified here requires to be completed within 1 year from now.
No resource needs have been specified
Work specified here will require more than 1 year (from now) to be completed.
For references, please go to https://www.eea.europa.eu/data-and-maps/indicators/fuel-prices-and-taxes or scan the QR code.
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