What impact does the carbon tax have on fuel prices?

The carbon tax, in force for ten years now, was one of the factors in the rise in fuel prices. But what is its real impact?

As you may know, the carbon tax came into effect in 2014 and applies to fossil fuels based on their environmental impactWith this tax, governments hope, on paper, to encourage the population to reduce its consumption of polluting fuels.

Is there a real ecological objective? We will let you be the judge, but the repercussions on consumers’ wallets, and in particular on fuel prices, are palpable.

Pay more to pollute less

Gasoline and diesel, which are among the biggest emitters of CO₂are at the heart of the carbon tax system. Concretely, This tax is added to the price of fuelin proportion to the carbon dioxide emissions they generate. For each tonne of CO₂ emitted, the price of the tax increases. In France, for example, the price of a tonne of CO₂ was 7 euros in 2008, reaching 44.60 euros in 2020. And this increase had a direct impact on the price per liter.
The objective of this tax is twofold: make fossil fuels less financially attractive and encourage consumers to adopt more environmentally friendly behaviorsThis can result in a reduction in fuel consumption, the use of public transport or the purchase of hybrid or electric vehicles, which are not affected, or at least less affected, by this tax.
The carbon tax is added to other taxes around fuel. In total, all these taxes together represent between 55 and 60% of the price at the pump.

A tax that is far from painless for the French wallet

This increase in the price of fuel is not without consequences, particularly for the most modest households or those living in rural areas. In these regions, where alternatives to the car are limited, the weight of the carbon tax is felt all the more. The Yellow Vest movement, born in 2018, also illustrates this discontent with the increase in fuel taxes, perceived as unfair and disconnected from social realities.
Low-income households are in fact the first to be affected. Dependent on their vehicles to get to work, they see their purchasing power decrease as the price of petrol and diesel increases. And if compensatory measures exist, such as the energy check or bonuses for the purchase of clean vehiclesthey are often not enough to fully offset the impact of the carbon tax.

The rise is not over yet

Beyond motorists, rising fuel prices have repercussions on the entire economy. Sectors dependent on transport, such as trade and logistics, are feeling the full brunt of this increase, which they then pass on to the prices of goods and servicesAs a result, all consumers end up paying more for their everyday consumer products.
According to several economists, this inflationary effect could increase in the years to come if the price of a tonne of CO₂ continues to increase.

In Europe, some predict that a tonne of carbon could exceed 100 euros by 2030, which would have an even greater impact on fossil fuel prices.