The impact of petrol and diesel oil taxes in EU member states on CO2 emissions from passenger cars

Ptak, Michał; Neneman, Jarosław; Roszkowska, Sylwia · 2024 · DOAJ

DOI: 10.1038/s41598-023-50456-y

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Summary

This study investigates the effectiveness of indirect taxes on petrol and diesel oil in reducing carbon dioxide (CO2) emissions from passenger cars across European Union member states. Motivated by the significant contribution of road transport to EU emissions and the theoretical role of fuel taxes as Pigouvian instruments, the authors aim to quantify the impact of these taxes while controlling for economic and infrastructure variables. The research addresses a gap in existing literature by focusing specifically on passenger car emissions rather than total road transport emissions, utilizing an extended dataset covering more countries and a longer time period than previous studies. The analysis employs panel data from EU member states, examining the relationship between indirect tax rates (excluding VAT) and CO2 emissions. The methodology accounts for various control variables, including GDP, population, and transport infrastructure, to isolate the effect of taxation. The authors also analyze the "economic affordability" of fuels, defined as the ratio of GDP per capita to the tax rate per liter, to assess how inflation and income growth have influenced the real burden of these taxes over time. The study reviews tax evolution from 2010 to 2019, noting that while some countries introduced carbon taxes or adjusted rates, many maintained static tax levels despite rising incomes. The findings confirm that fuel taxes have a generally negative but limited impact on passenger car CO2 emissions. This effect is consistent whether emissions are normalized by population or GDP and is stronger in member states with higher tax rates. The data reveals a divergence in emission trends: CO2 emissions from petrol cars decreased by 13% between 2010 and 2019, while emissions from diesel cars increased by 16%, driven by the "dieselization" of fleets due to historically favorable tax treatment of diesel. The study highlights that the economic affordability of fuels significantly increased in many countries because tax rates were not adjusted for inflation, effectively weakening the price signal intended to curb consumption. The authors conclude that current tax policies are often passive and insufficient for meeting climate objectives. They argue for a more active tax policy that adjusts rates in line with inflation to maintain the real economic burden on consumers. The paper emphasizes the political challenge of raising taxes during periods of high fuel prices, such as the 2022 energy crisis following the Russian aggression on Ukraine, where governments faced pressure to reduce taxes. The study suggests that aligning tax rates with income growth and eliminating tax differentials between petrol and diesel are crucial steps for enhancing the environmental effectiveness of fuel taxation in the EU.

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