While the war in Ukraine has increased fuel prices, the European Union has opted for subsidies to offset this increase. But according to the NGO Transport & Environment, this type of measure does not really benefit everyone. On the contrary, it could accentuate the inequalities between rich and poor people.
A measure that does not adapt to inequalities
According to the analyzes of this NGO, the reduction of fuel taxes will cost European taxpayers almost nine billion euros. Finally, this type of subsidy benefits the richest motorists more, who will receive eight times more public money than the poorest, on average, because they use their car much more. The NGO proposes on the contrary to impose an import duty on Russian oil. The Russian oil industry will have to absorb this additional cost, as it has no alternative to selling on the European market in the short term, according to the report. Another idea is to encourage the reduction of car journeys, which could help low-income households and strengthen Europe’s energy security, by supporting responsible transport.
The richest motorists end up benefiting more from the device
According to the analysis, the wealthiest 10% of drivers are particularly advantaged, as they consume much more fuel, drive more, often alone, and with larger and more polluting vehicles. A reduction of 15 cents on fuel, over six months, will reduce the bill for a BMW X5 driver by €300, compared to €85 for a Citroën C3 driver, for example. Not to mention the fact that lower-income households, who use public transport more, receive nothing.
To avoid inequalities, a redistribution of aid to low-income households would be more egalitarian
For Griffin Carpenter, an analyst at Transport & Environment, saving on this subsidy could translate into a redistribution of aid to strategically finance the households that need it most. “EU governments claim to be on Ukraine’s side, but instead of taxing Russian oil, they are subsidizing it with nine billion euros of taxpayers’ money. There are better ways for governments to help people. We could impose a tariff or a tax on Russian oil imports now. Instead of subsidizing wealthy drivers of gas-guzzling cars, cash assistance could be distributed more equitably to families who really need it.”
An opportunity to focus on responsible consumption and reduce the cost of public transport
The NGO also proposes to use this crisis as an opportunity to rethink excessive fuel consumption. While so far no measures have been taken to reduce oil demand in Europe, governments are only focusing on reducing fuel taxes, the study also reveals. According to a report by the IEA, the international energy agency, if all advanced economies took 10 emergency measures, they could quickly reduce global oil demand by 2.7 million barrels per day, equivalent to to oil demand of all cars in China. By allowing people to drive less, for example, by temporarily reducing public transport fares, governments could really help low-income, car-dependent households spend less on fuel.