Italy lets diesel tax cut expire as Europe grapples with fuel costs

Italy allowed a temporary cut in diesel excise duty to expire on Monday, ending a measure that had cushioned motorists against rising fuel costs. The discount was worth 6.1 cents per litre at its expiry, down from an initial reduction. The government had promised a mechanism using extra VAT revenue from higher oil prices to fund excise duty cuts, but the required joint decree from the economy and energy ministries was not issued by the deadline.

The government is still considering whether and how to renew support. Energy company Eni kept a temporary price cap in place but raised its diesel ceiling from €2.19 to €2.25 per litre, reflecting the end of the tax cut. Meanwhile, G7 countries agreed last week to release 100 million barrels of diesel and crude from strategic reserves.

European Commission proposals

European Commission President Ursula von der Leyen proposed pooling Europe’s energy demand and making joint purchases. She also said exporters would be given another year to prepare for EU methane rules, which require suppliers to declare greenhouse gas emissions linked to production. That obligation could be pushed back to 2028.

The Commission plans talks with European refineries to lower costs and secure supplies. A European Council meeting is scheduled for 15-16 October. Italian Prime Minister Giorgia Meloni called for “clear and concrete political guidance,” referring to a joint contribution with Czech Prime Minister Andrej Babiš.

National measures diverge

Meloni’s proposals include easing costs linked to the ETS system, supporting the most exposed industrial sectors, limiting the impact of CO2 costs on electricity prices, and postponing the entry into force of ETS2. A possible ad hoc tax on extra profits of oil and gas companies is on the table, backed by Economy Minister Giancarlo Giorgetti and viewed favourably by other European governments. European governments are moving ahead uncoordinated while awaiting EU measures. France extended and broadened a support scheme for long-distance commuters, paying €100 to each of 5.5 million beneficiaries plus a pump price discount. Companies can give up to €1,000 tax-free to employees using a private vehicle for work. The measures are expected to cost €450 million.

Germany, Spain, Belgium, UK responses

Germany’s Merz government introduced a temporary cut in excise duty of 17 cents per litre on diesel and petrol from 1 October, in force until the end of the year. Spain extended support measures for households and businesses until 31 December, with a tax cut of 20 cents per litre in October, falling to 13 cents in November and 6 cents in December. Inflation in Spain was 4.9% year-on-year, according to the National Statistics Institute.

Belgium’s regulated maximum prices limit station charges, but ceilings change with market conditions and do not prevent rises. The maximum diesel price hit a record €2.501 per litre on 22 September. In the UK, the average diesel price was 199.52 pence per litre for the week of 5 October, and the government extended a 5-pence-per-litre fuel duty cut until 31 December 2026.