The EU should fill its post-Brexit budget gap with new revenues from taxing transport, which is Europe’s biggest emitter of greenhouse gases, former Italian prime minister Enrico Letta, ex-WTO head Pascal Lamy, former finance minister of Germany Hans Eichel and 14 other economists have told EU leaders. In advocating a green tax shift, they called for a higher minimum tax on road diesel, VAT on airline tickets for the first time and taxing aviation kerosene which is currently exempt. Sustainable transport group Transport & Environment welcomed the letter, citing its own analysis that such a green tax shift would generate additional revenues of more than €50 billion a year which would allow for the income tax burden to be reduced.
One billion. That’s how much in euro that Germany’s tax on airline tickets generates every year. A billion is about a quarter of what trucks pay in Maut every year, or about 35 times less than the motor fuel tax.
MEPs voted today to limit the exemption from the EU ETS of flights to and from Europe until 2021, pending further information regarding the UN aviation body ICAO’s global offsetting measure known as ‘CORSIA’. Sustainable transport group Transport & Environment (T&E) welcomes this vote as essential to safeguarding European climate goals. MEPs also endorsed a number of reforms to aviation’s inclusion in Europe’s emissions trading scheme which will start to cut back on the sector’s special treatment on climate policy.
Flights to and from Europe have been automatically re-included in EU ETS since the start of 2017. In February the Commission proposed, in response to development at ICAO, to once more exempt these flights, this time indefinitely. The environment committee (ENVI) of the European Parliament adopted its report on this file in July, and the full Parliament will vote on it on September 13th.
T&E’s ETS calculator shows how getting the right balance on aviation’s inclusion in the EU emissions trading system (ETS) can help solve two problems at once: the sector’s major and growing climate impact, and Europe’s need to raise climate finance. Decision-makers should seize this opportunity offered by the ongoing reform of aviation provisions in the EU ETS.
Aviation is a substantial and growing driver of climate change, currently responsible for almost 5% of global warming. The objectives of the Paris Agreement cannot be achieved without action to rein in its emissions growth. This T&E briefing outlines how, at its triennial assembly, ICAO has an opportunity to adopt a global market-based measure which can be a starting point for greater global ambition. However, negotiations dominated by the need to protect industry and favour historic emitters is weakening the prospect of a credible deal.
Despite being in need of reform, the EU’s aviation ETS is functioning, is being complied with, and has the potential to deliver real emissions reductions, a new analysis shows. Its key design features – emissions allowances instead of offsets, being binding instead of voluntary, and full instead of partial coverage of emissions – are all superior to the draft global deal under negotiation at the UN’s aviation agency ICAO. Europe is under pressure to dismantle its regional measure even though discussions on a global measure at ICAO remain fractious.
There are growing calls for a green tax shift to the transport sector, which would help fill a gap in the EU’s budget after the UK leaves. A T&E analysis has found new measures such as a carbon tax on motor fuels, aviation kerosene duty, and ending the VAT exemption for flights within and from Europe would raise more than €50 billion annually. And last week, as EU leaders discussed the looming gap, 17 eminent economists rowed in behind the idea, calling it a ‘once in a decade opportunity’ to create a fossil-fuel contribution to the EU budget.
Transport is Europe’s biggest climate problem, representing 27% of the bloc’s greenhouse gas emissions. In order to meet its climate targets and avoid the severe impacts of climate change, stronger EU action on transport emissions is needed and fiscal policy has a key role to play – especially in the aviation sector which enjoys fuel tax and VAT exemptions and copious amounts of state aid.
Environmental organisations have long been concerned about the current rules relating to passenger transport VAT. The transport sector now accounts for the largest share of the EU’s greenhouse gas emissions, and the growth of aviation emissions now outstrips almost all other GHG sources. Yet member states oversee a VAT system which, through voluntary derogations, further inflates aviation’s rapid growth while also distorting competition with less carbon-intensive transport modes.