Fuels: Terra Nova proposes to adjust taxes according to barrel prices

“Tax less” on fuels in the event of a surge in oil prices, “and more in the event of a fall”: this is the proposal formulated Monday by Terra Nova, after weeks of heated debates on the price at the pump. “In the event of a surge in international barrel prices, the tax rate could decrease in order to mitigate the impact on prices at the pump. Conversely, the tax rate would increase when prices fall, in order to preserve the incentive to decarbonize,” explains climate economist Quentin Perrier in a note that the left-class think tank is due to publish during the day, while the Fuel prices flirt with 2 euros per liter.

The measure already existed in France between 2000 and 2002, under the Jospin government, under the name “floating TIPP”. But this system suffered from “three significant flaws”: its governance (each increase or decrease in taxes had to be voted on by Parliament), its complexity and its slowness in being reflected in service stations.

To remedy this, the note suggests defining each year in the finance law a scale which would automatically fluctuate the rate of taxes on fuel according to barrel prices. Thanks to this mechanism requiring no vote, gas stations could adjust the price at the pump “on a weekly basis,” “based on barrel prices observed on international markets.” For example, if France had adopted a system cushioning half of each increase in the price of a barrel through tax cuts, the price of diesel would not have exceeded 1.73 euros per liter in 2022, calculates Quentin Perrier.

With such a price level, “we can envisage” that the costly discounts at the pump decided by the government “would not have been necessary”. Modulating fuel taxes would have a “probably limited” cost for public finances, he further argued, while the 2022 rebate at the pump cost “nearly 8 billion euros”.

Faced with soaring fuel prices, several distributors have recently committed to selling them without margin, and TotalEnergies has capped their price at 1.99 euros per liter. The government has provided a check for 100 euros, subject to income conditions, for French people using their car to go to work. Its cost is estimated at less than 500 million euros.