Airlines obviously won't like it, but the prospect of new or higher taxes now seems inevitable. The problem that the European Union will have is getting other countries across the world involved.
European Union finance ministers are set to endorse a revamp of energy-taxation laws that could end exemptions for jet fuel while promoting cleaner forms of energy, as the bloc steps up efforts to cut carbon emissions.
Ministers meeting in Brussels on Dec. 5 will ask the European Commission to present updated rules on the taxation of biofuels and sectors such as aviation, “taking into account their specificities and existing exemptions,” according to a draft of their communique seen by Bloomberg News. The wording signals that the preferential tax treatment of aviation fuel could be phased out, under a new set of regulations.
Tackling transport emissions is one of the biggest challenges for the EU, which is weighing a commitment to climate neutrality by 2050.
Carbon discharges from international aviation have more than doubled since 1990, bucking a broader European trend that’s seen total emissions drop 22% over that period. The United Nations says the industry is set to overtake power generation as the single biggest CO2 producer within three decades.
The existing energy-taxation law, unchanged since 2003, was “adopted long before the emergence of new technologies and uses that are predicted to become important building blocks on the path to the EU’s decarbonised future,” the commission said in September.
The law applies standard tax treatment to electricity and biofuels, without differentiating between green and fossil-fuel based power sources. It also allows member states to tax jet fuel used for domestic flights unilaterally, and to strike bilateral agreements for intra-EU flights.
Airlines have criticized attempts to impose new taxes in Europe, arguing that reducing emissions requires a global solution. Carriers are embracing biofuel-kerosene blends, though penetration has been slow due to high costs and limited supply. A switch to hybrid and electric propulsion isn’t expected to be feasible until the mid-2030s, and then only for smaller airliners.
The commission also wants national governments to give up their veto on energy taxation, making way for the adoption of policies based on qualified majority voting.
©2019 Bloomberg L.P.
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Photo credit: Aircraft at Frankfurt Airport. European airlines face the prospect with paying tax on jet fuel. Fraport AG