From tax cuts to speed limits: how European governments are trying to cut fuel costs

Russia’s invasion of Ukraine has pushed fuel prices to record highs across Europe. And now a number of European countries are looking to cut fuel taxes and relieve drivers suffering from soaring costs of running a car.

In France, there are plans to offer a rebate of €0.15 per liter of fuel to help cushion the shock of price increases. It is estimated that motorists could save €9 on a 60 liter tank of fuel.

The “fuel reduction” will begin on April 1 and will last four months, Prime Minister Jean Castex said in an interview with Le Parisien newspaper. It is expected to cost the French government just over 2 billion euros and will cover households as well as businesses facing soaring prices at the pump.

The German finance minister also offered a “crisis discount” to reduce the impact of the war in Ukraine on fuel costs. It could see prices fall by 0.2 per litre, according to German media, but the measure has yet to be approved by the country’s three-party government coalition.

Fuel taxes in Sweden are also temporarily reduced at a cost of €350 million and car owners are compensated for rising fuel prices. Belgium and the Netherlands are also reducing fuel taxes to deal with the crisis.

EU-wide subsidies on fuel

Now the EU appears ready to follow suit, agreeing on Tuesday to subsidize household fuel prices and offer support to communities that have been hit by soaring energy costs. Ministers say the war in Ukraine is leading to a sharp rise in the price of raw materials, especially food and gas, calling for a coordinated response from European states.

One of the three strands of the EU strategy is to support those fighting against rising fuel prices.

“This one we did in France and many other European countries have done the same or are planning to do it,” French Finance Minister Bruno Le Maire told a news conference after chaired discussions between EU ministers.

“It would be a kind of discount on prices at the pump. Many, many people have no choice but to drive to work. Household support that we deem necessary.

Are there alternatives to reducing fuel taxes?

However, not everyone believes that cutting fuel taxes is the only way forward.

Green Party members in Germany have instead proposed a speed limit on German autobahns to reduce fuel consumption. A speed limit would be “good for protecting the climate, protecting resources and road safety”, according to Christopher Stolzenberg, spokesman for the Ministry of the Environment.

Other options are also on offer in Sweden, with an additional €384 million said to be added to the country’s budget to incentivize drivers to switch to electric vehicles.

Italy has also just put in place plans to subsidize the purchase of new electric vehicles. Up to €6,000 will be available when buying an all-electric vehicle and €2,500 for those buying plug-in hybrids.

Although the move is aimed at supporting the country’s auto industry and is not part of its program to mitigate the impact of war in Ukraine, it comes at a good time for those looking for ways to escape the rising fuel prices.

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