Gasoline and diesel demand in the EU: Implications for the 2030 emission goal

Abenezer Zeleke Aklilu

Renewable and Sustainable Energy Reviews, 2020, vol. 118, issue C

Abstract: Methodologically consistent demand estimates are necessary to analyze and forecast the effect of a common fuel policy across the EU-28. This study estimates short-run and long-run price and income elasticities for gasoline and diesel demands using the ARDL Bounds approach that also tests the existence of a long-run relationship using data from 1978 to 2013. The results show that elasticity estimates between the EU-28 countries vary and the estimated long-run elasticities are higher than their short-run counterparts, which is in line with expectations based on the existing literature. The short-run and long-run income elasticities of gasoline and diesel demand are found to be more elastic than their price equivalents implying that if a charge on fuel is designed to decrease emissions by increasing the price, the charge needs to rise at a higher rate than income. An analysis of the EU's 2030 emission and fuel consumption reduction targets using the estimated long-run elasticities shows that, with the current tax scheme, it cannot be guaranteed that emission targets will be achieved and thus a more stringent fuel tax policy is essential.

Keywords: Gasoline demand; Diesel demand; Price elasticity; Income elasticity; ARDL bounds; The EU-28 2030 emissions policy; Fuel tax (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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DOI: 10.1016/j.rser.2019.109530

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