Sustainable urban development is projected…
Saudi Arabia has cut the…
According to Argus Media, the European Commission has proposed exempting private jets and cargo flights, two of the most polluting forms of transportation, from the planned EU jet fuel tax. A draft indicates that the tax would be phased-in for passenger flights, including ones that carry cargo.
The draft, which the commission will present on 14 July with its proposed revisions to the bloc's 2003 energy-taxation directive, indicates there could be an exemption from taxation for energy products and electricity used for intra-EU air navigation of cargo-only flights. It proposes allowing EU states to only tax such flights either domestically or by virtue of bilateral or multilateral agreements with other member states.
The commission is worried that taxing fuel for cargo-only flights would adversely affect EU carriers, Argus reports adding that third-country carriers, also with a significant share of the intra-EU cargo market, have to be exempted from taxation due to aviation services agreements, the commission argues.
Meanwhile, private jets will enjoy an exemption through classification of "business aviation" as the use of aircraft by firms for carriage of passengers or goods as an "aid to the conduct of their business", if generally considered not for public hire. It gets better: a further exemption is given for "pleasure" flights whereby an aircraft is used for "personal or recreational" purposes not associated with a business or professional use.
Non-governmental organization Transport & Environment (T&E) called the proposal "generally good".
"The downside, though, is the commission is considering exempting cargo carriers that are often US-run," said its aviation director Andrew Murphy, who noted "multiple" solutions for taxing jet fuel used by cargo carriers that "tend to use older, dirtier aircraft".
Hilariously, none other than Murphy recently co-authored a report indicating that private-jet CO2 emissions in Europe rose by 31% between 2005 and 2019, with flights to popular destinations up markedly during summer holiday seasons. He has argued for a fuel tax for this "leisure-driven" private jet sector.
But, naturally, the very rich people who use private jets, pulled just enough strings within Europe's bureaucracy to avoid paying the tax.
Of course, in a world of fake concerns about climate change and ESG poseurs galore, there needed to be some excuse for this glaring exemption, and sure enough Airlines for Europe (A4E) came up with one, saying that it feared setting minimum tax rates for intra-EU flights could lead to distortion of competition. The industry association, which counts 16 airline groups as members including Ryanair, Air France/KLM, Lufthansa, IAG, EasyJet, and Cargolux, indicated that the commission's proposal could lead to aircraft deliberately carrying excess fuel bought outside the EU specifically to avoid the bloc's jet fuel tax.
So it's best to just do away with the tax altogether.
The draft may change before 14 July and does not contain the all-important annexes with tax rates. To enter into force it must be approved by all 27 EU member states, and it may change markedly over the coming months. A commission proposal made in April 2011 to update EU energy taxation rules failed after finance ministers could not agree by unanimity in 2014.
The commission wants to align energy taxation with EU climate goals, meaning that taxes should be based on the net calorific value of the energy products and electricity and that minimum levels of taxation across the EU would be set out according to environmental performance and expressed in €/GJ. These minimum levels should be aligned annually on the basis of the EU's harmonized index of consumer prices, excluding energy and unprocessed food.
Next week, the commission will propose changes to the EU's emissions trading system (ETS). A draft of these did not detail how aviation will be treated, but no free allocations are envisaged for maritime, road transport, and buildings sectors. Officials will also present the commission's mandate for sustainable aviation fuels (SAF), whereby all firms could be expected to fill up with blended jet fuels at EU airports.
More Top Reads From Oilprice.com:
The leading economics blog online covering financial issues, geopolitics and trading.