New tax tool calculates impact of ending aviation’s ‘nonsense’ exemption

T&E has made it easy to calculate the impact of finally making the aviation industry pay its fair share of taxes. The new tool – an emissions reduction and tax revenue calculator – shows how much emissions European countries could cut from planes and how much revenue they could raise from airline polluters. T&E says ‘the nonsense of airlines paying no tax on their fuel needs to stop.’

Although just about every form of mechanised transport has a tax on fuel, aviation has never had to pay a single cent despite burning increasing amounts of fossil-fuel kerosene. For years, airlines claimed that an agreement regulating international aviation, the Chicago Convention of 1944, prevented countries from imposing fuel taxes. But T&E showed this was not true back in 1995. And recent legal studies have set out how countries can actually start taxing fuel today through bilateral aviation fuel taxes. 

Carbon emissions from aircraft in Europe have risen by 27.6% since 2013 mostly because cross-border aviation has been exempted from effective carbon pricing. Only a handful of countries impose cheap ticket taxes and Europe’s limited emissions trading gives out half of aviation’s pollution permits for free.

Last year, an EU study said ending airlines’ fuel tax exemption would cut aviation emissions significantly, and now T&E’s Aviation Tax Tool shows how this can be done and what the benefits would be.

T&E’s aviation manager Jo Dardenne said: ‘The nonsense of airlines paying no tax on their fuel needs to stop, for the sake of the climate and governments’ coffers. European countries do not need to wait for unanimous EU approval – they can agree today to tax airline polluters and prevent emissions from bouncing back as aviation recovers from the Covid-19 lockdown.

‘Airlines are asking for billions in government bailouts but pay little tax themselves. That’s unsustainable. While European governments are pumping unprecedented amounts of money into recovery packages, ending aviation’s tax exemption will open a much needed revenue stream.’

The Aviation Tax Tool analyses how much revenue can be raised and how many emissions would be covered by the various options for jet fuel taxes. A group of countries (or even just two) can legally start taxing jet fuel today - the tool shows how much emissions can be avoided and how much revenue can be generated. For example, if a tax could be agreed by Germany, France, Italy, Spain, the Benelux and the EU Nordic countries, it would cover 59% of emissions from flights within Europe and raise €3.7 billion a year.

Last month, T&E published an analysis of the legal and economic viability of implementing kerosene taxation in Europe through bilateral taxation agreements, as a first step to reaching agreement on an EU-wide tax. The analysis confirmed that there are no legal obstacles to European countries taxing jet fuel through bilateral or multilateral agreements.

Airlines are currently seeking €32.9 billion in European taxpayer-funded bailouts with no binding environmental conditions attached.