European fuel efficiency standards for new vehicles will lead to a lower global oil price according to a groundbreaking new study published by Enerdata energy consulting.
National governments must respond by increasing fuel taxes to counteract the increase in oil demand and greenhouse gas emissions that would result, according to the European Federation for Transport and Environment (T&E) who commissioned the study.
Economic assessments of energy efficiency measures normally use fixed oil prices when accounting for economic benefits. But the Enerdata study, for the first time, examined the future effect on the oil price itself when carmakers are forced to comply with European fuel efficiency standards from 2012.
The report found that for every 1 per cent reduction in global oil consumption, the price of oil drops by up to 2 per cent. Furthermore it found that the economic benefits of fuel efficiency measures in Europe are typically underestimated by up to 17 per cent because of the failure to account for a drop in oil prices.
Jos Dings, director of T&E said: “This study shows that the economic benefits of energy efficiency measures in transport have been seriously underestimated in the past because nobody ever looked at what happens to oil prices as a result.”
“But our environment will pay a high price for cheaper fuel, so Europe needs to send a strong message that fuel tax increases at national level will have to go hand-in-hand with fuel efficiency standards if we are going to seriously tackle spiralling transport CO2 emissions.”
“Europe’s technological standards for new vehicles are incredibly important, but national governments can’t hide behind them. Higher fuel taxes will have to play an equally important role in getting emissions under control.”
“Although advocating higher fuel taxes may seem odd during the current economic crisis, governments could use the increased fuel tax revenues to reduce labour taxes which would boost jobs and the economy as a whole. It shouldn’t mean people being hit in the pocket.”
