Energy use in the residential building and road transport sectors in Romania contributes to climate change through greenhouse gas (GHG) emissions and to local air pollution, with significant impacts on public health and the environment. The Romanian government seeks to confront these challenges, balancing these concerns with considerations for public revenue needs and energy affordability. The trade-offs involved have become more pressing amid rising energy prices, geopolitical instability, and sustained inflationary pressures.
The Environmental Tax Policy Review of Romania reviews current tax practice in Romania in relation to GHG emissions and air pollution, with a focus on emissions from the residential buildings and road transport sectors. It assesses alignment with key tax policy objectives and proposes avenues for reform, exploring potential implications on fiscal, environmental and distributional outcomes through a simulation model and highlighting relevant international good practices. The analysis considers the extent to which taxes reflect external costs, the role of behavioural responses to government intervention in achieving environmental goals, the distributional impacts of energy pricing, and the revenue-raising potential of the proposed environmental taxes. The report highlights the importance of a well-designed policy mix that addresses the multiple market failures and policy objectives in these sectors.