The Newest Threat to Cheap European Flights? A Plan to Finally Tax Jet Fuel
When France's transport ministry announced this week that it would launch an "eco-tax" on flights, it also touched on a rising debate in European aviation: is it time to start taxing jet fuel?
Under a global agreement after World War II, it became standard to not tax fuel on international flights in order to incentivize commercial aviation—in contrast with taxes on fuel used on trucks and cars. (The same is true for international shipping.) The practice is still in place today, though the French government on Tuesday fired another salvo in an effort to upend it.
France said that the “eco-tax” would consist of 1.5 euros ($1.69) fee on inter-France economy flights per passenger, and 3 euros ($3.38) for flights outside of the EU—with higher fees for business fliers. And, alongside the Netherlands, it has called for the EU Commission to finally end the exemption on taxing jet fuel, known on land as kerosene. That jet fuel tax would be a separate, additional tax on top of the eco-tax, but both would have the same purpose: reducing emissions.
But the jet fuel tax could be difficult to implement—requiring multilateral cooperation, lest a single country bear the consequences—not to mention costly.
Tax as blunt tool
Even the minimum tax on fuel would cause the price for a flight in the EU to go up by an estimated 10%, according to a report released by the EU Commission in June.
Emissions, however, would decrease in tandem: falling by an estimated 11%, and bringing the aviation industry closer to reducing net-emissions as part of the Paris Agreement.
Taxing jet fuel is no doubt a blunt tool for addressing a vexing problem: while aviation accounts for just over 2.5% of global CO2 emissions, the soaring demand for cheap flights makes the industry the most difficult transit sector to decarbonize, according to the International Energy Agency (IEA).
A cost incentive
To be clear, operators already have a powerful incentive to be fuel efficient: cost.
Even untaxed, jet fuel is a huge expense, representing nearly 24% of operators’ costs in 2018, according to the International Air Transit Association (IATA), the industry’s global trade body. As recently as the first quarter of this year, Lufthansa and Air France-KLM both attributed losses in part to high fuel costs.
As a result, between 1968 and 2014, the fuel efficiency of new commercial planes improved on average by 1.3% per year due to newer and better models, according to a study from the International Council on Clean Transportation.
Alternate fuels have also gained ground, from hydrogen fuels to biofuels, which are now available at a handful of airports but don’t yet offer a price advantage, the IEA says.
Can't keep up
But even rapid advances in technology and efficiency can’t keep pace with the recent growth in mass air travel; it ballooned 140% since 2000.
A direct route to cutting emissions, then, is to hit that demand directly: if flying is less affordable, passenger numbers will dip (as will jobs in aviation), and emissions will follow.
Whatever form that hit to demand takes—an eco-tax, a jet fuel tax, the cost of lower-carbon fuel, or even just the cost of restocking with lighter, better jets—the days of low-cost European flights could be numbered. If that’s the case, it might worth resorting to an even lower-carbon option, and start booking trains.
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