Fuel taxes, fuel economy of vehicles and costs of conserved energy: The case of the European Union

Abstract

This chapter is an overview of the changes in real-world fuel economy in key countries and of recent developments in fuel taxes imposed on all fuels across the EU-Member States. Coal and gas are undertaxed but diesel and gasoline are overtaxed; however, fuel economy is directly affected by fuel taxes (prices) and not by taxes on coal. Standards on fuel economy can be interpreted as taxes on fuel and both standards and fuel taxes can be triggers for investment in alternative energy technology. Costs of conserved energy show that hybrid trucks are cost-effective to buy for freight transport operators so long as fuel costs are high. Trends in the cost of conserved energy are likely to favour investment in fuel saving technologies so long as fuel and oil prices remain high as is currently the case. Taxes on fossil fuels are one way to save fossil fuels and EU Governments are aware of the need to save fossil fuels and to reduce dependency on them. EU fuel taxes have led to improved fuel economy on EU roads.