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The EU is moving in the direction of agreeing to levy aviation taxes as part of a restructuring of a wide range of fossil fuel taxes to help achieve ambitious emissions targets.
Officials told the Financial Times that the EU finance ministers met in Lisbon on Saturday and expressed broad support for the proposal to impose a tax on the kerosene jet fuel used in aircraft within Europe.
Brussels has been working hard in the past few years to extend its fuel tax rules to aviation and maritime areas, but the EU has committed to reducing EU carbon emissions by 55% within the next ten years and achieving net zero emissions by 2050. Motivation was reinvigorated.
The aviation industry, which has been hit by the pandemic, has previously expressed concern about the EU’s kerosene tax plan.
In July, the European Commission will propose a comprehensive reform of its Energy Tax Directive, which sets a minimum tax rate for fossil fuels and has not been updated for nearly two decades. The unanimous agreement of all 27 member states must be won, which prevents an agreement on these changes.
Brussels said it will extend the tax rules to the tax-free aviation and maritime sectors. However, officials said that EU finance ministers expressed less support for the extension of the directive to shipping, and European geographic peripheral countries expressed concern about the plan.
The revision of the Energy Tax Directive will be the most politically sensitive part of the Brussels Green Agreement agenda, because every country effectively has the right to veto tax policies. Valdis Dombrovskis, the EU’s vice-president for economic affairs, said the directive was “outdated” and the ministers expressed “the right political motivation for change”.
The Minister of Finance of Portugal, João Leão, who chaired the meeting, said that Portugal supports the expansion of the navigation and aviation industries to help achieve the EU’s ambitious environmental goals.
Some EU countries have taken the lead in ending tax exemptions for jet fuel, and the Netherlands has pledged to implement national aviation taxes without an EU-wide agreement.
The reforms in Brussels will also aim to eliminate the exemptions provided by many member states for industries such as agriculture, coal and diesel. An official said that the committee is also considering implementing a stricter system to increase the minimum fuel tax within 10 years.
Energy tax is one of the main regulatory tools available in Brussels. It can help reduce emissions by making high-emission technologies more costly to consumers and companies. Another important carbon pricing plan that the committee wants to reform is the European Emissions Trading Scheme (ETS), which Brussels is also considering expanding to the shipping, aviation and automotive sectors.
Diplomats familiar with the discussion said that during the discussion, some finance ministers expressed concern about double charges for ships and airlines because they were included in the ETS and the energy tax rules were revised.
The committee also proposed to ministers an initial plan to introduce a carbon border tax, which will be taxed on EU imports based on their carbon footprint. This measure, which will be released in July, has aroused people’s vigilance in countries such as Russia and Ukraine. Brussels believes that the tax is necessary to protect the competitiveness of EU industry and prevent foreign companies that do not have to comply with emission targets from weakening their business.
Dombrovskis stated that the border tax will only be implemented “gradually”, and its initial scope is limited to high-emission imports such as cement, steel and fertilizers. He said: “We are confident that we will reach a consensus on a targeted carbon boundary adjustment proposal, which will be gradually improved over time.”
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