Plane fuel tax faces struggle to take off

Date: 11/02/1999

By Renée Cordes

The European Commission is set to rebuff calls for an EU-wide tax on aviation fuel, potentially crippling one of the German presidency's key policy goals.

German Environment Minister Jürgen Trittin has called for a European tax on kerosene to reduce emissions of greenhouse gases, which would help the Union meet the climate change goals agreed at Kyoto in November 1997.

But a study carried out for the Commission by an outside consultant has concluded that lifting the EU tax exemption on aviation fuel would have only a limited environmental benefit, providing fresh ammunition for those who argue that the Union should not go it alone in imposing a levy.

The findings have been welcomed by Europe's airlines, which have argued that a unilateral tax would put them at a financial disadvantage to non-EU competitors. However, environmental campaigners fear that if the Union does not introduce a levy, emissions from aircraft will continue to rise.

Commission officials are due to submit their recommendations to EU governments in the next few weeks. These may include proposals for other charges to stem emissions.

"The report confirms that there would be significant environmental benefits from the introduction of a kerosene tax on a worldwide basis, but that it would be inadvisable for the Community to introduce such a tax on a unilateral basis that penalises its own carriers and not those of third country carriers," said one.

The study also examines the potential socio-economic effects of an EU-wide kerosene tax on countries furthest from Europe's centre as well as the legal constraints on such a move.

In the past, the Commission has been hesitant about proposing an EU kerosene tax as any proposal would have to comply with the terms of several bilateral agreements. It therefore plans to stick by its argument that the International Civil Aviation Organisation (ICAO), the body which regulates air traffic, should press for a tax at the global level.

"We must not be too ambitious or we will get nowhere," said the official, pointing out that Norway was being forced to scale down its plans to introduce a kerosene tax on all international flights flying in and out of the country. However, he would not rule out an EU-wide levy in the long term.

Environmental campaigners have repeatedly criticised the ICAO for taking a least-common-denominator approach to the environment and argue that if the EU pressed ahead with a tax, this would increase pressure on other multinational bodies to follow suit.

"As a first step, we want to try this at the European level," said German State Secretary for Tax Policy Barbara Hendricks. "We believe this is especially necessary for environmental reasons because national train operators are in a disadvantageous competitive position compared with airlines, especially for short-haul flights."

The Commission is expected to rebuff calls for an EU-wide tax on aviation fuel.