European Commission reviews motor fuels taxation

LONDON Wed Feb 17, 2010 11:42am GMT

LONDON Feb 17 (Reuters) - The European Commission is reviewing the taxation structure of transport fuels in a move that could boost demand for gasoline at the expense of diesel, an EU official said on Wednesday.

The current taxation structure favours diesel over gasoline and this has prompted the auto industry to produce more diesel-powered cars.

Refiners in Europe are investing in upgrading capacity to maximise their diesel output to meet the rising demand for diesel.

On the other hand, a fall in gasoline use in the region and import demand from the United States have resulted in oversupply of the fuel, keeping overall plant utilisation rates of European refiners low over the past yeaer.

"The Commission is currently looking at taxation of gasoline and diesel," Marcus Lippold, directorate of energy and transport of the European Union, told a conference.

"You could put a cap on dieselisation."

But he said that any decision on taxation would take 15 years to take effect because of the sluggish process of vehicle replacement.

"It would at best be a mid-term change," he said.

In the next few years, demand for liquefied petroleum gas (LPG) as a motor fuel could grow, because of its green credentials, he said.

Some European governments, including Germany, subsidise LPG prices at the pump and this has boosted consumption.

"LPG might be a good bridging fuel to get to decarbonisation in transport," he said.

(Reporting by Emma Farge; Editing by Amanda Cooper)

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