As an answer to soaring oil prices, stabilization mechanisms based on specific taxes, such as the French 'TIPP flottante', have been discussed and introduced in some countries in early 2000s, but then soon abandoned. Our contribution aims at analyzing the excise pass-through and the cost shifting in a comprehensive European context to understand whether such a mechanism could actually reach its target. Our results show that, on average, fuel tax reductions are effective in stabilize consumer price, but the measure is particularly costly for public budgets.
- Excise pass-through
- Fuel market