Press Release

Bilateral agreements and archaic fuel exemptions

October 27, 2005

Jos Dings, Director of T&E writes in this week's European Voice: The EU-US aviation agreement has been under discussion once again. But an important issue has been conspicuous by its absence from the debate; namely the need to remove a standard clause found in existing bilateral agreements which effectively rules out taxation on aviation fuel.

[mailchimp_signup][/mailchimp_signup]The fuel tax exemption stems from the period after the Second World War when many governments looked to boost the fledgling international aviation industry. Sixty years on, times have changed but international aviation agreements have not.
Greenhouse gas emissions from the aviation sector are growing by 4% per year and, unchecked, could be responsible for a quarter of the EU’s global warming impact by 2020. In a positive first step, the Commission has recently announced its desire to include aviation emissions into the European Emissions Trading System (EU-ETS). But all the evidence suggests fuel taxes will also be needed if we are to see real reductions.
The EU has maintained, for a number of years, a policy of “keeping options open” on environmental measures for the aviation sector. At last year’s convention of the International Civil Aviation Organisation (ICAO), it was largely thanks to a united European-led effort that US moves to outlaw unilateral action in this area were held back.
The fuel tax exemption limits Europe’s options. That is why the clause was struck out of the first agreement signed by the EU on behalf of all member states with Chile earlier this year. Fifteen similar agreements due to be signed by the EU in the near future will also rightly give the signing parties the freedom to tax fuel if and when they see fit.
But the US government is likely to fight tooth and nail for the continuation of this protectionist measure. Europe should strongly resist this pressure. It would be foolish and irresponsible to limit our possible options for tackling greenhouse gas emissions at this stage, especially when such limits are dictated by a US administration that has so far refused to acknowledge the scale of the challenge we face.

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