Fuel Taxation

At present, there are huge differences between Member States' excise duty rates on diesel, as current European legislation (Directive 1992/82/EEC) fixes only a minimum, but not a maximum rate. The minimum rate for diesel used for commercial purposes (road haulage, passenger transport) and for diesel used by private individuals is the same.

In all Member States, except the UK, duties on diesel fuel are a lot lower than on unleaded petrol. On average, this difference amounts to about 140 euros per 1000 litres. While there is no justification for this advantage in terms of environmental performance of diesel engines, the number of diesel cars has grown substantially over the last years.

In February 2002, levels of petrol and diesel taxation were as follows (in euros per 1000 litres):

EU-15 Member State s:

Candidate Countries:

With the current proposal, the Commission chooses to separate tax arrangements for commercial diesel and for diesel used by private individuals. While the excise duty for commercial diesel will be harmonised, for non-commercial diesel and petrol only minimum levels will be set.

The main elements of the proposal are:

• Commercial diesel fuel:

Excise duties on diesel for commercial purposes, i.e. for goods vehicles over 16 tonnes and passenger vehicles for more than nine passengers, will be gradually harmonised. A single rate will be achieved for the EU-15 by 2010, and for the new Member States by 2012.

From 2003, there will be a "central rate" of 350 euros per 1000 litres. By 2010, the gradually narrowing "fluctuation band" on either side will have disappeared, and the single harmonised rate will have risen to around 410 euros, as it will be subject to annual indexation.

• Non-commercial diesel fuel:

Minimum excise rates for non-commercial diesel will be aligned with those of unleaded petrol by 2006. Member States will, however, still be free to apply higher rates and differentiate between diesel and petrol.

The increase is reflected in the following table (in euros per 1000 litres):

The proposal has two major aims:

• to create equal conditions for competition among European road hauliers and coach operators, especially as the sector has been fully liberalised since 1998.
• to help to protect the environment by
  • increasing the overall levels of diesel fuel taxation (in most Member States), which is expected to serve as an incentive for efficient fuel use;
  • levelling out differences between Member States, so drivers would no longer make detours to fill up in countries where excise duty is low;
  • abolishing the fiscal advantage of diesel over petrol fuel cars, leading to a reduction in particulate and NOx emissions, which are at least three times higher with diesel than with petrol engines.

However, in its common position on the Community framework for energy taxation (COM(1997)30) the Council agreed to uphold the fiscal differences between petrol and diesel fuel. (Several countries, including Austria, Belgium, Luxembourg, Portugal and Spain, even have longer deadlines to adjust their minimum diesel duties to these minimum rates.)

The agreed minimum levels of excise duty on petrol and diesel fuel are reflected in the following table (in euros per 1000 litres):

In November 2003, the Parliament rejected the Commission proposal under the consultation procedure. It was unconvinced that harmonisation was justified to protect the environment or for competition reasons. 

The road haulage and passenger transport industries are satisfied with receiving special tax arrangements to offset increases in fuel costs. Still, the International Road Union (IRU) criticises the scope of the arrangement, saying the advantageous "professional rate" should be applicable not only to the heaviest, but to all commercial vehicles. Also, the proposed refunding procedure should be simplified, it argues.

Environmental NGOs broadly welcome the upward harmonisation of commercial diesel taxes, but criticise the fact that heavy trucks ("commercial vehicles") get a fiscal advantage over lighter ones. The harmonised rate on diesel should apply to all commercial vehicles, they say - actually in line with the road industry - because the 16 tonnes threshold may lead to the increase in the use of (more polluting) heavier lorries. Also, they deem the envisaged rates still not high enough to internalise environmental costs and limit the growth of road transport.

The European Economic and Social Committee suggests using the additional revenue generated by the upward harmonisation of commercial diesel fuel taxes to fund priority European transport infrastructure. For that purpose, it proposes setting up a European Infrastructure Fund.

The UK, which has the highest diesel duties in Europe, is set to keep its rate. The Treasury earns £12bn a year from commercial diesel excise and would in no way accept a single rate across the EU, despite a treaty requirement to eliminate distortions in the single market, officials say.

The European Parliament rejected the proposal and asked the Commission to present a new proposal which dealt with the matter in a way that was better coordinated with the recently adopted directives on energy taxation.

Non-assigned links

• Eur-Lex: Proposal for a Council Directive amending Directive 92/81/EEC and Directive 92/82/EEC to introduce special tax arrangements for diesel fuel used for commercial purposes and to align the excise duties on petrol and diesel fuel (COM(2002)410) [ FR FR DE
• Commission: Excise duties: Commission proposes harmonisation of taxation on commercial diesel fuel (press release, 24 July 2002) [ FR FR DE
• Commission: Commission proposal on harmonisation of commercial diesel taxes - frequently asked questions (press release, 24 July 2002) [ FR FR DE
• Eur-Lex: Proposal for a Council Directive restructuring the Community framework for the taxation of energy products (COM(1997)030) [ FR FR DE
• Commission: Results of meeting of Economics and Finance Ministers, Brussels, 20 March 2003 Taxation (press release, 21 March 2003) [ FR FR DE
• Eur-Lex: Council Directive 92/81/EEC on the harmonization of the structures of excise duties on mineral oils [ FR FR DE
• Eur-Lex: Council Directive 92/82/EEC on the approximation of the rates of excise duties on mineral oils [ FR FR DE
• Parliament, OEIL: Fuels: tax for commercial diesel fuel, excise duties on petrol and diesel fuel [ FR
• SCADPLUS: Mineral oils: approximation of excise rates [ FR FR DE
• France: Harmonisation de la fiscalité du gazole (1 April 2003)
• International Road Union (IRU): "Professional" diesel tax proposal excludes most commercial vehicles (25 July 2002)
• International Road Federation (IRF): The "Milk Cow" protests at last: IRF (Geneva) Director General Wim Westerhuis comments on current fuel tax policies in the European Union
• T&E, EEB: T&E, European Environmental Bureau (EEB): Response from Non-Governmental Organisations on the Commission proposal for a Directive to introduce special tax arrangements for diesel fuel used for commercial purposes (29 January 2003)