The European Commission wants to implement plans announced last year to increase taxes on polluting fuels and introduce an EU-wide levy on aviation kerosene. These measures are intended to put it at the forefront of global efforts to reduce carbon emissions.
The ‘Fit for 55’ package puts the EU at the forefront of decarbonisation efforts. But it risks a backlash from some governments, the aviation industry and the public.
In a statement, European Commission president Ursula von der Leyen argued that the principle of taxing aviation fuel is simple: “Emissions of CO² must have a price – a price on CO² that incentivises consumers, producers and innovators to choose clean technologies to go toward clean and sustainable producers. And we know that carbon pricing works.”
Willie Walsh is director–general of the International Air Transport Association (IATA). He called the EU policymakers to support practical emission reduction measures such as production incentives for sustainable aviation fuel and modernisation of Europe’s patchy air traffic management rather than resort to taxation.
He adds: “Aviation is committed to decarbonisation as a global industry. We don’t need persuading or punitive measures like taxes to motivate change. In fact, taxes siphon money from the industry that could support emissions reducing investments in fuel renewal and clean technologies.”
Walsh’s views are shared by most airlines, including Air Malta, which is again in restructuring mode. If approved, Air Malta says that the existing proposal will increase today’s fuel price by around 90 per cent by 2033.
The airline lobby is strong and it is not surprising that all stakeholders in the travel industry fear irreparable damage if the EU takes mandatory measures to deal with the problem of climate change.
Environmentalist organisations argue that one thing that environmental taxes, levies and surcharges have in common is that they are dirt cheap compared to the negative externalities of burning jet fuel, which, in addition to direct CO² emissions, include nitrous oxides with global warming potentials 265 times that of CO².
The local tourism industry that relies on mass flows of visitors with limited spending power needs to quantify the likely effects of the EU proposals on taxing jet fuel to recalibrate their strategies. Still, updating the EU energy taxation directive will require unanimous backing from the 27 member states.
According to the European Federation for Transport and Environment, the proposal’s main flaw is that the tax rate does not apply to flights outside the EU, representing 60 per cent of all emissions. As usually happens in EU negotiations, small countries like Malta, Cyprus, and Ireland may finally be granted some concessions to agree on a final taxation policy. Paolo Gentiloni, the European Commissioner for Economy, calls the reform a “now or never moment”.
The European airlines industry remains fragmented compared to the US. More rationalising is needed to reduce excess capacity. Travellers also need to be better informed of the environmental impact of fast-increasing air travel to understand why reducing carbon emissions is inevitable.
The Brussels policymakers must surely be conscious of the reality of Louis XIV’s first minister of state, Jean-Baptiste Colbert, who said that: “The art of taxation consists of plucking the goose to get the most feathers with the least hissing.”
Reconciling national and sectorial interests with Union-wide priorities will be as tough as they have always been in the EU.