Ministry: The impact of excise duty increases is not significant.

Excise Duty Hikes Expected: Electricity Price to Rise by Nearly 50 Percent, but Inflation Impact Remains Small

From Thursday, excise duty rates for electricity and several fuels will increase significantly in Estonia. While the electricity excise duty will rise by almost fifty percent, the Estonian Ministry of Finance estimates that this and other excise duty hikes will not have a significant impact on the overall price level, adding only about 0.03 percent to inflation.

Currently, the electricity excise duty is €1.45 per megawatt-hour, but from Thursday it will rise to €2.1 – a 45 percent increase. According to Sander Randver, head of energy products at Enefit, the average consumer's annual electricity bill is around €540. The excise duty increases will not change this much.

"For the average domestic consumer, this means an extra cost of around €2-4 per year. That's quite a marginal impact – it doesn't show up directly in your monthly bill," Randver explained.

The excise duty on natural gas will rise by 18 percent from Thursday, which Randver estimates could increase household consumers' costs by up to €20 per year.

The excise duty on liquefied petroleum gas will also increase by more than 20 percent, while the excise duty on diesel fuel will rise by seven percent. According to Alan Vaht, a member of the management board of fuel retailer Terminal, the change in diesel excise duty will have a small impact compared to the price fluctuations at gas stations.

"In fact, in Estonia, when you look at excise duty, diesel prices are the lowest – lower than in Latvia and Lithuania. In that sense, anything up to a three-month increase in excise duty as opposed to what we see every week, how much prices fluctuate, it won't have a very big impact. Competition is keeping prices down, and prices may not actually go up on Thursday," Vaht noted.

In addition, excise duties on heavy fuel oil and motor gasoline will also rise from May. However, according to Vaht, their impact on the final price will be minimal. The excise duty on motor fuel is set to go up five percent from July 1 and by the same amount again in the following years. This is a continuation of a plan to increase excise duties that had been temporarily suspended due to Covid-19.

"Last year saw the first major excise rise, so to speak, and this year is the second in a row. There are two more to come over the next two years. The total cumulative excise increase is 12.1 cents, and when multiplied by VAT, the impact is 15 cents," Vaht said.

Excise duties have an impact on both the state budget and inflation.

"The impact on the budget is undoubtedly positive. We estimate that excise duty increases will raise €12-13 million for the 2025 budget. The impact on the consumer price index is around 0.03 percent of all excise increases, so it's not even half a percent," explained Erle Kõomets, head of the tax and customs policy department at the Ministry of Finance.

Avaldatud 01/05/2025