In 2014, diesel fuel made up 70% of all transport fuel sold in Europe, while petrol fuel was 30% of the market. Biodiesel accounted for 80% of the EU market in biofuels while ethanol made up the oth
Europe currently consumes more diesel than it produces, with more than 10% of diesel demand met by imports. The opposite is the case with petrol, where the equivalent of about 40% of EU petrol demand is exported. Europe exports its excess petrol to markets such as the US or Africa. However, changes in US energy policy, including the increased use of ethanol in the US petrol market, mean that the opportunities for EU petrol exports to the US are in decline. This has left Europe with a large surplus of petrol that it is having difficulty selling to its traditional export markets. Europe should focus on retaining more of its petrol exports and reducing its diesel imports.
The existing energy taxation regime in Europe favours diesel over petrol and biodiesel over ethanol and is one of the reasons behind Europe’s over reliance on diesel and biodiesel fuel. This over reliance has meant that, the diesel market has now grown to 70% of Europe’s transport fuel market, while its biodiesel substitute now commands 80% of the EU biofuels market. Meanwhile, petrol has declined to 30% of the transport fuel market, with ethanol making up 20% of the biofuels market. This growing dieselisation trend has led to significant p
ublic debate about the increased use of diesel vehicles, with some European cities planning a total ban on diesel vehicles in urban areas to reduce particulate air pollution in cities.
Spurred on by the favourable tax regime for diesel, the shift from petrol to diesel began 20 years ago, when the petrol to diesel ratio was 2:1. It is now inversed to 1:3 and could potentially reach 1:4 by 2020, according to FuelsEurope.
Based on volume, ethanol is the most taxed transport fuel in Europe, and is taxed even higher than polluting kerosene. A fairer energy taxation system is needed. With Europe’s dependence on imported diesel increasing – in particular from Russia – a fairer taxation regime would enable Europe to readdress its fuel balance, allowing for further petrol-ethanol penetration and to properly address issues such as air quality, energy security and long term cost.