Should the EU tax aviation fuel?

There is no mode of transport that is more associated with modernity than flying. Today, just over a century after the first manned flight, airplanes can zip us to the other side of the planet. Yet flying has its costs, notably in emissions. And as the world deals with its climate crisis, campaigners are hoping that a tax on airplane fuel could address the issue.

Plans for an aviation tax emerged just in time for the European Parliament elections, with French President Emmanuel Macron notably supporting it. The idea also earned the backing of the liberal ALDE’s Margrethe Vestager. Mrs Vestager, who has won a second term as EU Competition Commissioner, says the revenue should help subsidise cleaner transport, like railways. “Out of the planes, into the trains,” she said.

But this is was not just an election issue. There are also serious economic and environmental arguments for an aviation tax, as a Commission report has suggested. The report, which was leaked in early May, said taxes on aviation fuel would reduce the sector’s carbon emissions by 11% and have a “negligible” impact on employment and the economy.

It says a tax of €330 for every 1,000 litres of kerosene (which is the EU’s minimum excise duty rate for the fuel) would raise ticket prices by 10% and lead to a 11% fall in passenger numbers – and this would push down carbon emissions. Aviation supports close to 5 million jobs and contributes €300 billion, or 2.1% to European GDP. While a kerosene tax would lead to a 11% fall in aviation sector jobs, its impact on jobs and GDP as a whole would be “negligible” due in part to the higher fiscal revenues the tax would generate, the report says.

The case for aviation tax was also bolstered by an April study from the lobby group Transport & Environment, which says that Europe’s aviation carbon emissions have jumped 26.3% over the past five years. By contrast, other emission-trading sectors actually reduced their emission by 3.9% in 2018. Meanwhile, Ryanair is now the first airline in Europe’s top ten biggest polluters, according to Commission data, joining a list that has until now only included coal-fired power plants.

The aviation sector has hit back at these suggestions, pointing out that it already pays several taxes, including air passenger duty and VAT for domestic flights which average at €11 and €4 respectively across the EU. Airbus’s new CEO Guillaume Faury has complained that this would “add taxes on taxes”.

But the EU is already facing pressure from capitals on this issue, and the Netherlands announced that it will start charging levies on air passengers by 2021 if no EU solution emerges.

Commission officials say that lifting the tax is one of a number of measures it is considering to address aviation’s carbon footprint, including a revision of its Energy Taxation Directive, emission trading, offsets, fuel and aircraft standards, and operational improvements. Whatever its conclusion, the result is likely to result in pricier flights. But it could also lead to cleaner air.