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The EU is moving towards an aviation tax agreement as part of a comprehensive renewal of fossil fuel taxes to help achieve ambitious emissions targets.
EU finance ministers meeting in Lisbon on Saturday expressed broad support for upcoming proposals for a European-wide tax on kerosene jet fuel used in aircraft, officials told the Financial Times.
Brussels has struggled in previous years to extend its fuel tax rules to areas such as aviation and maritime, but the cause has been revived with the bloc’s commitment to reduce EU carbon emissions in a 55% over the next decade and zero net in 2050.
The aviation industry, which has been hit by the pandemic, has previously expressed concern over plans for an EU kerosene tax.
In July, the European Commission will propose a major overhaul of its energy taxation directive that sets minimum tax rates for fossil fuels and has not been updated for nearly two decades. The agreement on the changes has been hampered by the need to win a unanimous agreement from the 27 member states.
Brussels has indicated that it will extend tax rules to sectors such as aviation and maritime that are exempt from the system. However, EU finance ministers expressed less support for the extension of the directive to maritime transport, and countries on the geographical periphery of Europe expressed concern about the plans, officials said.
The renewal of the directive on energy taxation will be one of the most politically sensitive parts of the Brussels Ecological Agreement agenda, as all countries effectively have a veto on fiscal policy. Valdis Dombrovskis, the EU’s vice president of economics, said the directive was “obsolete” and ministers expressed the “right political moment to make changes”.
João Leão, Portugal’s finance minister, who chaired the meeting, said his country supported the extension to the maritime and air sectors to help achieve 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.
The renovation of Brussels will also aim to root out the exemptions provided by many Member States to sectors such as agriculture, the coal and diesel industries. The commission is also considering a stricter system in which minimum fuel taxes will increase over a ten-year period, an official said.
Energy taxes are one of the main regulatory tools that Brussels can use to help reduce emissions by making higher-emission technologies more expensive for consumers and businesses. The other significant carbon pricing initiative that the commission wants to reform is the European Emissions Trading Scheme (ETS), which Brussels is also considering expanding to cover maritime transport, aviation and cars.
During the discussion, some finance ministers expressed concern over the imposition of double cargo on ships and airlines by including them in the ETS and energy taxation rules were renewed, diplomats familiar with the discussion said. .
The commission also presented to ministers its initial plan to introduce a border tax on carbon that would tax imports into the EU based on its carbon footprint. The measure, which will be published in July, has caused alarm in countries such as Russia and Ukraine. Brussels has argued that the collection is necessary to protect the competitiveness of EU industry and prevent companies from being undermined by foreign companies that do not have to meet emissions targets.
Dombrovskis said the border tax will only be introduced “gradually”, limiting the initial scope to high-emission imports such as cement, steel and fertilizers. “We are confident we will have a consensus on a specific proposal for a carbon boundary adjustment that is gradual over time,” he said.
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