Fuel price relief benefits car owners, but it’s ecologically counterproductive, says RWI

Germany’s three-month petrol and diesel discount that has been in effect since 1 June has been largely passed on to consumers, but it is ecologically counterproductive and also provides a greater benefit to the wealthy rather than lower-income households, according to the Leibniz Institute for Economic Research (RWI). The measure temporarily cut energy taxes to the EU-wide minimum level in order to relieve consumers of high energy prices, resulting in a 14-cent-per-litre reduction for diesel and a 30-cent-per-litre cut for premium petrol over a three-month period. When corresponding value-added tax (VAT) is included, the total tax relief reaches 16.7 cents per litre of diesel and 35.2 cents per litre of premium petrol, says RWI. A comparison of fuel prices in Germany and France now shows that the discount has actually reached final consumers, said RWI. Many had feared that gas stations would pocket the discount.

Whilst relieving drivers, the initiative offers no ecological benefits, nor does it offer fair savings for all, the RWI found. “Despite being passed on to drivers, the fuel discount makes no sense either from a distribution or from an ecological point of view,” said Manuel Frondel, head of the RWI’s Environment and Resources division. “The fuel discount is more likely to help the wealthy than poor households. They often don't own a car at all. In addition, the fuel discount is ecologically counterproductive: it does not encourage people to use less petrol and diesel. But that is exactly what would be necessary for ecological reasons.”