Effective and affordable alternatives to fuel tax cuts

The war in Ukraine has dramatically highlighted Europe’s dependence on fossil fuel imports and has driven fuel prices to the highest level in a decade. In reaction to this price spike, many European governments adopted fuel tax cuts (price reductions at the pump) to soften the impacts on citizens. 18 out of the 27 EU governments have taken such measures, at a total cost of almost €16 billion that could rise even further if these policies are prolonged or kept permanently.

These additional subsidies for fossil fuels, however, are not the right policy, as they are expensive to taxpayers and also increase fuel consumption. In addition they are socially skewed towards (richer) car drivers, and by increasing fuel consumption, they harm the climate and create toxic air pollution. Hundreds of millions of EU citizens could see a rapid cut in their consumption of Russian oil if governments shifted these €16 billion towards clean transport alternatives.