Corporate jets to escape EU’s ‘green’ aviation fuel tax

 Executive jets will escape plans to tax polluting aviation fuels, according to draft proposals to be presented by the European Commission on Wednesday.

The commission plans to set an EU-wide minimum tax rate for aviation fuels, as it seeks to meet more ambitious targets to fight climate change.

A draft of the commission’s tax proposal takes aim at aviation, which escapes EU fuel taxes.

That exemption “is not coherent with the present climate challenges and policies,” the document said, adding that EU tax rules promote fossil fuels over green energy sources and need rewriting to support the bloc’s climate goals.

The proposal would impose an EU-wide minimum level of tax on energy products supplied as aircraft fuel for flights within the EU.

From 2023, the minimum tax rate for aviation fuel would start at zero and increase gradually over a 10-year period, until the full rate is imposed. The draft proposal did not specify what the final rate would be.

Executive jets

However, the minimum EU tax rate would not apply to cargo-only flights or to “pleasure flights” and “business aviation” – a term that covers executive jets.

Business aviation in Europe has already climbed back above 2019 levels even amid ongoing travel restrictions, according to aviation consultants WingX. The number of flights in June was 2 per cent higher than in 2019, with the figure for the last week of the month and the first week of July 6 per cent ahead of the 2019 equivalent.

For the first six months of 2021 global business aviation activity fell only 4 per cent short of the first half of 2019, and was 42 per cent up on the first half of 2020. By comparison, scheduled airline activity was still 45 per cent behind 2019 levels over the same period, WingX said.

Executive jet travel accounts for just under 19 per cent of all aviation, according to the consultants, while cargo traffic accounts for just 4.7 per cent of flights.

While Brussels will not include corporate jets in the scope of the fuel tax, according to the draft documents, it will be open to member states to choose to tax those flights’ fuel on a national basis.

Greenhouse gas emissions

The commission’s move is part of an overhaul of EU energy taxation to meet a target to reduce EU greenhouse gas emissions by 55 per cent from 1990 levels by 2030. The levy on aviation fuel is part of a package of measures that will be unveiled on Wednesday.

Introducing the proposals could be politically difficult. Changes to EU tax rates require unanimous approval from the 27 EU countries, meaning a single state could veto them.

EU countries are responsible for setting national taxes, although Brussels can set bloc-wide minimum rates.

The levies would be based on a fuel’s energy content and environmental performance, meaning polluting fuels would become pricier.

The aim is to encourage airlines to start switching to sustainable fuels, such as e-kerosene, to curb greenhouse gas emissions. Uptake of such fuels has been hampered by high costs, and they make up less than 1 per cent of Europe’s jet fuel consumption.

The commission declined to comment on the draft proposal, which could change before publication.

The draft proposal would also introduce minimum tax rates on polluting fuels used for waterborne navigation, fishing and freight transport within the EU.