Brussels aims to tax aviation fuel to reduce carbon emissions

Brussels will present plans this week to raise taxes on polluting fuels and introduce an EU-wide tax on aviation kerosene for the first time, under measures to put it at the forefront of global efforts to reduce emissions. carbon emissions.

The European Commission will propose a renewal of its 15-year rule book on carbon taxes to provide an incentive for low-emission fuel and impose taxes on the highly polluting energy used in the airline and shipping industry. The measure is one of dozens of policies to be unveiled on Wednesday to ensure the EU can meet its goal of reducing average carbon emissions by 55% by 2030. Others include an EU extension. emissions trading scheme, harder CO2 standards for cars ia imposition of carbon on some imports.

A draft legal text of the Energy Taxation Directive, seen by the Financial Times, proposes to gradually increase the minimum rates for the most polluting fuels such as gasoline, diesel and kerosene used as aircraft fuel over a period of ten years. Zero-emission fuels, green hydrogen and sustainable aviation fuels will not be applied for a decade to the proposed system.

The “Fit for 55” package puts the EU at the forefront of decarbonisation efforts, but the proposals run the risk of reactions from some governments and citizens.

The introduction of environmental taxes is likely to be one of the most politically sensitive measures in the commission’s plans. Unlike most of Brussels’ new green policies, updating the energy taxation directive will require the unanimous support of all 27 EU member states to become a reality.

Paolo Gentiloni, Brussels’s economic commissioner, described the reform as “a moment now or never”.

“Paradoxically, [the current energy taxation directive] encourages fossil fuels and not green fuels. We need to change that, ”Gentiloni said at a meeting of G20 finance ministers this weekend.

EU energy taxation standards date back to 2006 and have created a system that “favors the use of fossil fuels” due to a number of exemptions and gaps for raw energy in different member states, according to the text. The directive is designed to set a number of minimum tax rates for energy products throughout the block.

One of the major changes proposed is the end of exemptions for highly polluting fuels, such as kerosene used in aviation. The draft indicates that aircraft fuel used on flights within the EU should be subject to a new minimum tax rate, the details of which have not yet been decided, officials said. However, the rules should exempt cargo-only flights and apply lower fares for non-commercial flights, according to the bill.

While many EU countries have welcomed a tax on kerosene, it has provoked resistance from the aviation industry. Brussels also plans to phase out free carbon credits provided to the sector under its ETS. Along with tax rules, the phasing out of free quotas would significantly increase pressure on aviation to reduce its emissions or pay for pollution.

The draft says that gradually raising minimum taxes over a ten-year transition would help avoid the problem of “double taxation” for the maritime and airline industries that run the risk of undergoing two ways to set the price of CO2.

Airline group A4E has said the new carbon taxes for the sector are “ecologically and economically counterproductive” and that the market-based price of carbon should be the only major way to set the price of CO2 for industry. .

“A tax on intra-EU kerosene could lead to a distortion of competition within the European internal market and globally,” A4E said. “It is possible that a possible kerosene tax setting minimum tax rates for flights within the EU will have the most negative impact, as it may open the door to different rates within the single market.”