Estonian fuel sellers keen to tie excise duty to CO2 emissions

Photo: Margus Ansu

The Estonian Oil Association that represents major fuel retailers has proposed tying excise duties for fuels to their carbon dioxide (CO2) output.

The head of the association Mart Raamat says in a proposal tabled on the association’s behalf that in the future taxation should be based on two components: the size of the ecological footprint of the specific fuel, and how much money the state wishes the duty to bring into state coffers. 

The climate component should be tied specifically to CO2 output, the biggest emitter of which is liquefied petroleum gas (LPG), followed by diesel, gasoline and compressed natural gas (CNG). No climate component would be levied on biogas, or methane, due to its zero carbon emission. 

The association has also provided CO2 output figures for all fuels commonly used in Estonia.

The association finds that the state should continue to have the possibility to raise or cut the fuel excise duty to meet political objectives, such as help rural areas, facilitate road transport and also fill the state budget.

It says that combining the two components would produce a tax system that is much more understandable and transparent than the current system, while taking into account carbon emissions. 

The newest promise of the EU climate policy says that by 2050, Europe will stop being a net emitter of CO2.

Also European Commission President Ursula von der Leyen has made it clear that the size of the fuel excise duty should depend more on the output of emissions when the fuel is burned.

Raamat said that the system put forward by them is already in use in Denmark, Sweden, Ireland, Slovenia, Portugal, and with certain variations in Austria.