Decrease in fossil fuel subsidies by 6% observed in the previous year
In 2022, the government introduced temporary measures to respond to rising energy prices, including direct subsidies to households and businesses. However, the year also marked a significant milestone as the maximum fossil fuel subsidies since 2014 were reached, representing 1.8% of GNI.
Fast forward to 2024, government measures led to a 46% reduction in fossil fuel subsidies, primarily through targeted policy interventions aimed at reducing reliance on fossil fuels. The carbon charge for consumers of road diesel increased 22% to €207 per tonne of carbon dioxide emitted, while the charge on jet kerosene decreased from €29 to €24 per tonne.
However, these reductions were not fully maintained due to economic pressures, political challenges, and shifts in government priorities amid broader financial instability in Europe. As a result, the value of the remaining measures was down 46% to €940 million, and the revenue forgone due to the excise exemption for jet kerosene used in commercial aviation increased by 19% to €720 million.
The average effective carbon rate for petrol in 2024 was €274 per tonne of carbon dioxide, followed by road diesel at €207. In contrast, the average effective carbon rates on jet kerosene and on fuels used to generate electricity fell. The reduced excise rate on road diesel compared to the petrol excise rate led to €370 million in forgone revenue in 2024.
The CSO attributed the recent increase in the average effective carbon rates to the removal of temporary excise and National Oil Reserves Agency levy rate reductions introduced in 2022, coupled with increases in carbon tax on these fuels.
It's worth noting that fossil fuel subsidies went from 1.2% of gross national income (GNI) in 2021 to 1.5% in 2024. The total estimated fossil fuel subsidies from these measures in 2023 were €1.7 billion, and in 2022, they were €1.1 billion.
The average effective carbon rate for marked gas oil, used in agriculture, forestry, and fishing, was €76 per tonne of carbon dioxide. The average effective carbon rate for aviation gasoline, rail diesel, and marked gas oil used in agriculture and fishing also increased.
In conclusion, while progress has been made in reducing fossil fuel subsidies and increasing carbon taxes, there are still challenges to be addressed, especially in maintaining these policies amid economic and political pressures. The continued monitoring of these trends will be crucial in the pursuit of a more sustainable energy future.
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