Which EU countries have managed to eliminate diesel’s unfair fiscal advantage? In which EU countries is zero tax levied on palm oil diesel? Answers to all these questions – and more – can be found in T&E’s interactive tool based on datasets of fuel consumption taxes for road transport in all 27 EU member states and the UK since 1995.
In real terms, today western Europeans pay less fuel tax than 20 years ago
Transport is the biggest emitter in the European Union. Road transport – cars, vans, trucks and motorcycles – accounts for 21% of total EU greenhouse gas (GHG) emissions. While climate change has become a political priority of the Commission (aka the European Green Deal), in real terms (considering inflation), fuel taxes have decreased in recent decades. In fact, the sales-weighted average petrol and diesel fuel tax dropped from 68 cents per litre of fuel in 2000 to 54 cents in 2019.
€24 billion is the exorbitant amount of lost revenues from failing to tax diesel fuel at the same rate as petrol in the EU in 2019
Europe’s favourable diesel taxation stems from a historical legacy of providing cheaper fuel for the trucking industry. Carmakers made a case for the climate benefits of diesel to justify the difference in taxation. The gap that remains between petrol and diesel taxes in Europe today is quite unique and is the main reason why diesel engines have taken off in Europe and not worldwide.
Faced with the air pollution crisis in cities, and realising that diesel isn’t any better for the climate, EU member states have been rethinking their tax policies.
The gap between diesel and petrol taxes is closing very slowly but surely. In 2019, the gap in tax levels for diesel and petrol paid by motorists approaches €0.12 per litre, diesel tax being 27% lower than petrol tax per unit of energy.
The Good, the Bad and the Ugly
Following the UK, Belgium became the second EU country to equalise both taxes – by decreasing petrol tax and increasing diesel tax. This bold move put an end to the artificial and unfair advantage of diesel fuel. The increase in fuel taxes was accompanied with a decrease in labour tax, which minimised the impact on the middle classes, making it more pollitically palatable. This tax shift was further cushioned by keeping an eye on the final price of fuel at the pump, increasing taxes when crude oil prices were going down.
At the other end of the spectrum, Greeks filling up their diesel cars pay 29 cents per litre less than the motorists driving a petrol car. This perverse incentive has promoted the burning of more and more diesel fuel in Greek cities, exacerbating the air pollution crisis in the Hellenic Republic.
The most blatant case of ‘fuel tourism’ is Luxembourg, where diesel is taxed at €0.35/l. Until May 2019 Luxembourg authorities were taxing diesel at €0.33 per litre, equal to the EU’s legal minimum level. In this way Luxembourg’s taxman seduces hauliers into filling up in that territory. But there is light at the end of the Luxembourgish tunnel as national authorities are planning to change it, even if at a very slow pace.
I want (part of) my money back
In Belgium, France, Hungary, Ireland, Italy, Romania, Slovenia and Spain truck drivers have the option to partially recover the diesel tax they pay. Trucks pay on average €0.43/l diesel tax in the EU now, €0.07 below the rate cars pay. Truck diesel tax rebates totalled around €4 billion in 2018, up from zero in 1999. The number of countries giving fuel tax rebates to hauliers has gone up from only one in the year 2000 to eight now.
 Some countries have considerably increased the rebate:
France has gone from €0.0489/l in 2014 to €0.1572/l in 2020. Belgium, from €0.0763/l to €0.2476/l. Spain, from €0.0271/l to €0.049/l.
In others, it has decreased:
Ireland, from €0.055/l to €0.004/l in 2020. Slovenia, from €0.1214/l to €0.11645/l. Hungary, from €0.036 to €0.011/l.
In others it remained stable:
In Italy, at €0.2142/l both in 2014 and 2020, while in Romania at €0.04/l.
Even if larger consumers of diesel (i.e. France or Spain) have increased their consumption, the overall rebates are very similar to T&E’s report in 2015. The reason is that in 2015 there was not public data on how much diesel trucks consumed. Nowadays, data is published every year. Compared to the more accurate data today, consultant CE Delft overestimated in 2015 the share of total diesel consumption that was consumed by trucks.