More Pain at the Diesel Pump?<BR> An Econometric Comparison of Diesel and Petrol Price Elasticities

The recent revision of the European Commission's Energy Tax Directive intends to tax fuels based on both energy content and related carbon dioxide emissions. To explore the implications of such a tax regime for automobile travel, this paper undertakes a comparative econometric analysis of price elasticities for diesel and petrol using panel estimation methods. Drawing on household panel data from Germany (1997-2009), we fail to reject the hypothesis that the fuel price elasticities for petrol and diesel are equal. © 2013 LSE and the University of Bath