arbiter
JournalsAccount

How Do Governments Set Fuel Excise Levies? A Testable Theoretical Framework and Evidence from Australia

Julian Inchauspe & Raymond Li

Energy Journal2026https://doi.org/10.1177/01956574251414079article
AJG 3ABDC A
Weight
0.50

Abstract

This paper addresses the important question of how governments set fuel excises. A theoretical framework leads seven possible nested hypotheses to explain fuel excise setting: (1) inflation adjustment, (2) fuel price relief, (3) coordination with GST revenue, (4) sterilisation of oil price shocks, (5) attenuation of the business cycle, (6) public debt financing, and (7) environmental action. Its reduced-form empirical counterpart is estimated with an asymmetric ARDL model with time-varying dynamics on quarterly data for Australia covering 1990 to 2023. It is found that all hypotheses but one are relevant in explaining policymaker’s actions, and their influence is quantified. Importantly, evidence suggests that business cycle and public finance are significant driving factors, each with asymmetric dynamics that depend on the direction of the shocks. These findings help understand the patterns observed in fuel taxation decisions and inform the evaluation and public discourse on the motives of fuel taxation. JEL Classification: Q41, Energy: Demand and Supply; Prices; Q48, Energy: Government Policy

Open via your library →

Cite this paper

https://doi.org/https://doi.org/10.1177/01956574251414079

Or copy a formatted citation

@article{julian2026,
  title        = {{How Do Governments Set Fuel Excise Levies? A Testable Theoretical Framework and Evidence from Australia}},
  author       = {Julian Inchauspe & Raymond Li},
  journal      = {Energy Journal},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1177/01956574251414079},
}

Paste directly into BibTeX, Zotero, or your reference manager.

Flag this paper

How Do Governments Set Fuel Excise Levies? A Testable Theoretical Framework and Evidence from Australia

Flags are reviewed by the Arbiter methodology team within 5 business days.

Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.