Baltic and Polish countries potentially seeking a postponement of fuel price surges from Brussels
In a joint effort, Lithuania, Latvia, Estonia, and Poland have expressed concerns about the upcoming overhaul of the European Union's emissions allowance system and its potential impact on fuel prices. The concerns stem from the anticipated drastic fuel price hikes that could result from the changes.
The catalyst for these concerns can be traced back to the Defence Fund law, adopted last year, which increased excise duties on various energy products, including gasoline, diesel, green farm diesel, oil gas, and others, by €0.06 per litre (excluding VAT), starting in January 2023. This increase, combined with the EU directives requiring a faster increase in the carbon dioxide (CO2) component for polluting fuels, has led to significant increases in fuel prices.
Specifically, the CO2 component for fossil fuels has resulted in a 10.1% increase in excise tax on gasoline, a 26.7% increase on diesel, a 41.7% increase on marked diesel, and around a 22% increase on liquefied petroleum gas. As a result, Lithuania now has the highest diesel excise duty in the region, at €0.52 per litre.
Prime Minister Gintautas Paluckas has acknowledged the situation, stating that while the excise revenue plan is on track this year, the sharp increase in fuel prices could make Lithuanian businesses less competitive. Paluckas has not ruled out reviewing the excise policy in 2026.
The potential economic burden, compliance challenges, energy security concerns, and competitive disadvantages are among the reasons these countries are seeking a delay in the regulations that will increase the cost of fossil fuel-based fuels starting in 2028.
However, there is uncertainty about whether these countries will be able to agree on a joint appeal to the European Commission. More than 20 business organizations have joined the call, urging a review of the Lithuanian government's fuel excise policy, a pause on the excise hike planned for 2026, and an agreement with Poland, Latvia, and Estonia on aligning their policies.
Despite these concerns, Paluckas has emphasised that Brussels must respond, as the continued increase in fuel prices due to these regulations is expected to lead to dramatic fuel price hikes by 2029-2030. Without a coordinated approach, these countries risk facing significant economic challenges in the near future.
As the situation unfolds, it remains to be seen whether the European Commission will grant these countries' requests for a delay in the emissions allowance system overhaul. The outcome could have far-reaching implications for the economies of Lithuania, Latvia, Estonia, and Poland, as well as the broader European Union.
Finance and business sectors in Lithuania, Latvia, Estonia, and Poland might experience setbacks, as the anticipated drastic fuel price hikes due to the overhaul of the European Union's emissions allowance system could affect their competitiveness, particularly in industries heavily reliant on energy. Consequently, the countries are seeking a delay in regulations that will increase the cost of fossil fuel-based fuels starting in 2028, which could potentially impact the broader European Union's economy.
