The Impact of Petrol and Diesel Oil Taxes in EU Member States on Co2 Emissions from Passenger Cars

Abstract

The article aims to explain road CO2 emissions, including passenger car emissions in the EU member states, with the rates of indirect taxes (except VAT) for petrol and diesel oil. Apart from tax rates, the analysis includes some selected variables concerning economies and transport infrastructure, which impact CO2 car emissions. Compared to the existing literature, we focus on emissions from passenger cars and analyse more countries over a more extended period using more updated data. Our findings confirm that fuel taxes have a generally negative but limited impact on emissions from passenger cars. This impact is independent of whether we relate emissions to the number of inhabitants or GDP and is generally stronger in EU member states with higher taxes. In many countries, the economic affordability of fuels has significantly increased over the last few years. This phenomenon is another argument for a more active tax policy, i.e., general adjustment of the tax rates in line with inflation. There is also great importance for those adjustments in times of high fuel prices when governments are under tremendous pressure not only to stop tax increases but to reduce them, which was the case in 2022 after the Russian aggression on Ukraine.

Keywords: energy tax, CO2 emission, climate policy