BERLIN, GERMANY / RankWire.AI / – Germany’s federal and state governments have reached an agreement to lower the energy tax on petrol and diesel by 14 cents per litre. When combined with reduced value-added tax, this package will cut the overall tax burden on fuel by approximately 17 cents per litre. The measure is set to be in effect from Oct. 1 through Dec. 31, 2026. Germany’s cabinet has given its approval for the draft legislation to proceed to parliament. This initiative revives a temporary fuel-tax rebate that was used earlier this year as pump prices climbed again.
The proposed fuel tax relief in Germany totals around €2.5 billion, benefiting both consumers and businesses. Half of this amount, €1.25 billion, will come from federal states through a fixed share of VAT revenue. The legislation still needs approval from the Bundestag and Bundesrat before it can be enacted. Officials have coordinated the plan with state governments and coalition parliamentary groups. As of Sept. 22, the proposal had not yet completed the parliamentary approval process required for the scheduled October implementation.
A similar reduction was implemented earlier in May and June 2026, lowering the energy tax on petrol and diesel by 14.04 cents per litre. The associated VAT reduction brought the total tax relief to about 17 cents per litre. The Federal Cartel Office and the Independent Monopolies Commission later confirmed that retailers largely transferred the savings to consumers. The previous rebate ended on June 30, returning energy taxes to their normal rates before the new package was developed.
Tax Cuts Aimed at Petrol and Diesel Expenses
This new measure utilizes the same fundamental tax mechanism, cutting the energy tax by 14 cents per litre. As the energy tax drops, the taxable retail amount decreases, which also reduces VAT, resulting in an overall tax reduction of around 17 cents per litre. Fuel prices at individual stations may still differ due to wholesale costs, distribution fees, and station-specific pricing strategies.
The federal government announced the plan following a sharp rise in fuel prices during September, driven by a roughly 30% increase in global oil prices amid ongoing Middle East conflict and disruptions through the Strait of Hormuz. These developments coincided with higher petrol and diesel prices across Germany. The €2.5 billion package provides relief for both private drivers and commercial users of road fuel. The total value reflects an estimated relief over the three-month period ending in December.
Recent Benchmark: The Previous Rebate
The earlier rebate, active from May 1 to June 30, reduced energy taxes for petrol and diesel over two months. Including VAT, the reduction was about 17 cents per litre, matching the scale of the current proposal. This rebate resulted in an estimated €1.6 billion loss in tax revenue. The current plan extends similar relief over three months, covering the last quarter of 2026.
The draft legislation sets October 1 as the starting date and December 31 as the end. Parliamentary approval is the final step before implementation. After the cabinet’s approval of the draft, the Bundesrat and Bundestag will review the measure. The confirmed package includes a 14-cent reduction in energy tax and about 17 cents per litre in total tax relief. Germany’s states will contribute €1.25 billion toward the total €2.5 billion cost of this temporary fuel-tax relief.