In a big picture sense, they're the same. I think it says something different about intent though. A subsidy says something is essential or desirable. A relatively lower, but still very high excise tax says one thing is disliked less than the other.
And really, there usually is little significance to how the subsidy is paid, it's usually just an artefact of how it developed historically and how things were easiest to implement, potentially depending on psychological factors.
I mean, what would the alternative look like? You have to pay the same tax for both, but then can claim back a fixed percentage of the taxes on diesel? On the same form? Or should they have created a separate agency that processes the refunds? There simply is no other sensible way to implement this subsidy, and that's why it is the way it is.
I think jacquesm adequately explained one of the major distinctions: a high tax that's slightly lower than the tax on a competing good does not result in a below-market price. While many of the effects are similar, it is not the same.
> a high tax that's slightly lower than the tax on a competing good does not result in a below-market price.
Erm ... what do you consider "the market price"?
I suppose it's not the price that people actually pay for something in the market, as then even the state paying for all your diesel needs would still not qualify as a subsidy (if the state pays for it, you don't pay anything, that would make the market price zero under that definition, so the free diesel would not be under market price, therefore not a subsidy, right?)?
But what is the market price, if it's not what people pay?
> While many of the effects are similar, it is not the same.
In economics, oversimplifying slightly, the market price is the equilibrium price. That is, where the demand curve and supply curve cross. This is the price the market will settle on without outside forces acting on it.
A subsidy results in a sale price below the equilibrium price while sellers receive payments above the equilibrium price. An excise tax has the opposite effect.
Different excise taxes on competing products may lead consumers to prefer one over the other, but still results in less consumption of both products than the market would without intervention.
OK, so let's check whether that holds up: Suppose petrol was taxed at 1000 EUR/l and diesel was taxed at 0.01 EUR/l. Do you think that that would lead to less consumption of diesel than in the no-intervention equilibrium with the seller receiving payments below the no-intervention equilibrium price?
