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The European Union's (EU) plan to impose a tax on aviation fuel has hit a snag as the bloc's 27 member states have failed to agree on prices for green fuels and fossil fuels.
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| Refueling a flight in France Photo: RAUTERS |
There are still many disagreements.
EU member states are negotiating a reform of their energy tax system, which has not been revised since 2003, to bring it in line with climate goals, including a levy on aviation fuel. But two years after the bill was first proposed, the EU has yet to reach a consensus on the idea. Member states remain divided on a number of issues, including whether to tax some fuels that are not taxed at all or at low rates.
An EU diplomat said the disagreement was unlikely to be resolved before the end of the year. Meanwhile, a European Commission spokesman said the energy tax reform would eliminate outdated exemptions. Under the EU proposal, a minimum tax on aviation fuel for flights within Europe would be gradually increased over 10 years, while sustainable aviation fuel would be exempted from the tax for 10 years to encourage its use. However, some EU member states disagreed with the measure, arguing that the imposition of a tax on aviation fuel could lead to higher fuel prices for citizens ahead of next year's European Parliament elections.
The EU also proposes higher minimum taxes on polluting fuels like gasoline, and lower taxes on electricity and sustainable fuels. Supporters of the EU proposals say the new taxes would make low-carbon transport like electric trains more cost-competitive with fossil-fuel flights, while also providing governments with the revenue to invest in sustainable transport.
No optimal solution found yet
Under the EU fuel tax system, member states can levy jet fuel nationally and between member states, making flights within the EU relatively cheap compared to other modes. However, only a few EU members, such as the Netherlands and Germany, implemented a commercial jet fuel tax for domestic flights between 2005 and 2011. Due to implementation complications and low revenues, the Netherlands discontinued the tax on commercial domestic flights in 2012.
The EU also operates an emissions trading scheme (ETS), where companies pay a fixed price for each tonne of carbon they emit. Historically, airlines have received allowances that have significantly reduced their carbon-related costs. As part of the EU’s ambitious plan to reduce carbon emissions by 55% by 2030, proposals have been put forward to gradually reduce these allowances, eventually reaching zero by 2027.
In Canada, taxation policies on aviation fuel have some similarities to the EU, with provinces such as Alberta offering tax breaks for flights with international destinations. Canada also implements additional indirect taxes on fuel through carbon pricing, similar to the EU’s ETS program, which puts a price on carbon emissions to encourage emissions reductions.
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