EU Treasury Ministers support future tax on fossil aviation fuel (after decades)
For decades, there has been no international agreement on the taxing of aviation fuel, and it has been wrongly assumed that taxing it was impossible. But now the EU is considering how the fuel should be taxed, as part of the bloc’s attempts to cut carbon emissions over all its activities. The EU now has the target of a 55% cut in CO2 emissions by 2030, and reach “net zero” by 2050. Aviation must play its part in the reductions. Higher fuel prices would increase ticket prices, thus reducing slightly demand for air travel. In July, the European Commission will put forward an overhaul of its energy taxation directive that sets minimum taxation rates for fossil fuels, but has not been updated for nearly 20 years. There have been difficulties in getting agreement on carbon cuts from the newer EU members, and every country effectively holds a veto on taxation policy. Some countries such as the Netherlands have been pushing for aviation fuel taxation, and says it will introduce a national aviation tax in the absence of an EU-wide agreement. Aviation should also be charged through the EU Emissions Trading System, which currently only adds small costs to intra-European flights.
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EU targets aviation with renewed fossil fuel levy
22.5.2021 (Eminetra)
The EU is approaching an air tax agreement as part of an extensive reform of fossil fuel levies to help meet ambitious emission targets.
The EU Treasury Ministers’ Meeting in Lisbon on Saturday expressed broad support for future proposals for a European-wide tax on kerosene jet fuel used in aircraft, officials told the Financial Times.
Brussels has struggled to extend its fuel tax rules to areas such as aviation and maritime affairs, but will reduce EU carbon dioxide emissions by 55% over the next decade to net zero by 2050. The cause was rekindled by the block’s efforts to do.
The pandemic aviation industry had previously expressed concern about EU kerosene tax plans.
In July, the European Commission sets a minimum tax rate for fossil fuels and proposes a major overhaul of the Energy Tax Directive, which has not been updated for nearly 20 years. The change agreement has been hampered by the need to obtain unanimous agreements from all 27 member states.
Brussels has indicated that it will extend its tax rules to sectors such as aviation and maritime, which are exempt from the system. However, EU Treasury Ministers have weakened their support for the expansion of the directive to shipping, and European geographic neighbors have expressed concern about the plan, officials said.
The revision of the Energy Taxation Directive will be one of the most politically sensitive parts of Brussels’ Green Deal Agenda, as virtually every country has veto power over taxation policies. Valdis Dombrovskis, EU Vice-Chairman of Economic Affairs, said the directive was “obsolete” and that ministers expressed “the right political momentum to make a difference.”
Portugal’s Treasury Minister João Leão, who chaired the conference, said his country had helped expand into the maritime and aviation sectors to help achieve the EU’s ambitious environmental goals.
Some EU member states are leading accusations to end jet fuel tax exemptions, and the Netherlands has promised to introduce national aviation taxes without EU-wide agreement.
The Brussels renewal also aims to eradicate the exemptions that many member states provide to sectors such as agriculture, the coal industry and diesel. The Commission is also considering a stricter system in which the minimum fuel tax will be raised over a decade, officials said.
The energy tax is one of the major regulatory tools available to help Brussels reduce emissions by making higher emission technologies more expensive for consumers and businesses. Another important carbon pricing initiative that the European Commission wants to reform is the European Union Emission Trading Scheme (ETS), which Brussels is considering extending to shipping, aviation and automobiles.
During the debate, some finance ministers expressed concern about imposing double billing on vessels and airlines by including them in ETS, and the energy tax rules were amended, diplomats familiar with the debate said. ..
The Commission also presented the Minister with the first plan to introduce a carbon border tax on imports into the EU based on carbon dioxide emissions. The bill, announced in July, has warned countries such as Russia and Ukraine. Brussels argues that taxation is needed to protect the competitiveness of EU industry and avoid underestimating businesses by foreign companies that do not need to comply with emission targets.
Mr Donbrovsky said border taxes will only be introduced “in stages” and the initial scope will be limited to high-emission imports of cement, steel and fertilizers. “We are confident that we will reach consensus on a targeted carbon border adjustment proposal that will be phased in over time,” he said.
@mehreenkhn
https://eminetra.co.uk/eu-targets-aviation-with-renewed-fossil-fuel-levy/485702/
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See also
Bloomberg 24.5.2021
EU Leaders Set for Spat Over Distribution of Carbon-Cut Burden
https://www.bloombergquint.com/onweb/eu-leaders-set-for-spat-over-distribution-of-carbon-cut-burden
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EU to target aviation in revamp of fossil-fuel levy
Finance ministers back proposal to help meet ambitious carbon-emissions targets
By Mehreen Khan in Lisbon (Financial Times) @mehreenkhn
MAY 22 2021
The EU is moving closer towards agreeing a tax on aviation as part of a wide-ranging revamp of fossil-fuel levies to help meet ambitious emissions goals.
EU finance ministers meeting in Lisbon on Saturday expressed broad support for upcoming proposals for a Europe-wide tax on kerosene jet fuel used in aircraft, officials told the Financial Times.
Brussels has struggled in previous years to extend its fuel taxation rules to areas such as aviation and maritime but the cause has been re-energised by the bloc’s commitment to reduce EU carbon emissions by 55 per cent over the next decade and net zero by 2050.
The aviation industry, which has been battered by the pandemic, has previously expressed concerns about the plans for an EU kerosene tax.
In July, the European Commission will propose a big overhaul of its energy taxation directive that sets minimum taxation rates for fossil fuels and has not been updated for nearly two decades.
Agreement on the changes has been stymied by the need to win unanimous agreement from all 27 member states.
Brussels has indicated it will extend the taxation rules to sectors such as aviation and maritime that have been exempt from the system. However, EU finance ministers expressed less support for the extension of the directive to shipping, with countries on the geographic periphery of Europe expressing concerns about the plans, said officials.
The revamp of the energy taxation directive will be among the most politically sensitive parts of Brussels’ green deal agenda as every country effectively holds a veto on taxation policy.
Valdis Dombrovskis, EU vice-president for the economy, said the directive was “outdated” and ministers expressed the “right political momentum to make changes”.
João Leão, Portugal’s finance minister, who chaired the meeting, said his country backed the extension to the maritime and aviation sectors to help meet the EU’s ambitious environmental goals.
Some EU countries have led the charge to end tax exemptions for jet fuels, with the Netherlands promising to introduce a national aviation tax in the absence of an EU-wide agreement.
Brussels’ revamp will also aim to root out exemptions provided by many member states to sectors such as agriculture, the coal industry, and for diesel. The commission is also considering a more stringent system where minimum fuel taxes are ramped up over a 10-year period, said an official.
Energy taxes are one of the main regulatory tools Brussels can wield to help drive down emissions by making higher emitting technologies costlier for consumers and companies. The other significant carbon pricing initiative the commission wants to reform is the European Emissions Trading Scheme (ETS), which Brussels is also considering extending to cover shipping, aviation and cars.
During the discussion, some finance ministers voiced concerns about imposing double charges on ships and airlines by including them in the ETS and the energy taxation rules revamp, said diplomats familiar with the discussion.
The commission also presented ministers with its initial plan to introduce a carbon border levy that will tax imports into the EU based on their carbon footprint. The measure, which will be published in July, has raised alarm in countries such as Russia and Ukraine. Brussels has argued the levy is needed to protect the competitiveness of EU industry and avoid businesses being undercut by foreign companies that do not have to comply with emissions targets.
Dombrovskis said the border levy would only be introduced “gradually”, with its initial scope being limited to high emissions imports such as cement, steel, and fertilisers. “We are confident of having a consensus on a targeted carbon border adjustment proposal that is gradual over time,” he said.
https://www.ft.com/content/bdacdcd5-4e7b-491e-8621-bddabd208be5
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See earlier:
Experts say legal obstacles no barrier to introducing aviation fuel tax for flights in Europe
EU countries can end the decades-long exemption on taxing aviation fuel. Legal experts say it is possible to tax kerosene on flights between EU countries. This could either be done at EU level through a series of bilateral agreements or by agreement between individual countries. Transport & Environment (T&E) has found that the old argument that foreign carriers’ operating within the EU – de facto a small number of flights – can’t be taxed can be overcome by introducing a de minimis threshold below which fuel burn would not be taxed. At present (and for decades past) airlines, unlike almost all other forms of transport, pay no fuel tax on flights within or from the EU – even though aviation causes 5% of global warming. They also pay no VAT. Despite the aviation industry’s attempts to hide behind the 1944 Chicago Convention, when the agreement was made on not taxing aviation fuel, that is not what is preventing fuel taxation. In fact it is old bilateral ‘air service agreements’ that European governments signed up to years ago that include mutual fuel tax exemptions for non-EU airlines. It remains too hard to tax fuel for international, non-EU, flights.
The report, “Taxing aviation fuels in the EU” by CE Delft, is at
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Netherlands planning to start taxing air travel by around €7 per passenger, from 2021
The Netherlands plans to impose a €7 tax per passenger in 2021 if the EU fails to come up with an aviation fuel tax. Momentum is building for a crack-down on aviation’s environmental impact. The Netherlands’ finance state secretary said its draft flight tax bill could yield €200 million and “help close the price gap between plane tickets and, for example, train tickets”. The proposals – still a draft, to be debated by politicians – are that any air passenger departing from a Dutch airport will be charged a maximum of €7.50. Cargo planes will also be charged, at a rate of €1.92 for less noisy planes and €3.85 for more noisy aircraft. There was a tax until scrapped in 2009. At present, unlike travel by car, bus or train, international flights from the Netherlands are not in any way taxed by the Dutch government. There has also been a proposal that the Netherlands and Belgium made earlier this year on imposing aviation taxes via bilateral deals – and the Netherlands may look at implementing others. If there is EU agreement on another aviation tax, before 2021, then the current Dutch tax proposal will be dropped. On 13th May a report emerged that showed taxing jet fuel would cut EU CO2 emissions and have a limited impact on employment.
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