Aviation remains heavily subsidised, with all parts of the sector - from airports to aircraft manufacturers to airlines - receiving state support. Any public money should come with green strings attached.
€5 million Lost every hour by European governments because aviation is untaxed
Aviation remains heavily subsidised, with all parts of the sector - from airports to aircraft manufacturers to airlines - receiving state support.
A large part of this subsidising comes from the undertaxation of the aviation sector. The result is artificially cheap ticket prices, which serve to drive up demand and reduce incentives for more sustainable aviation.
Firstly, extend the European carbon market (the EU Emission Trading System) to cover all departing flights.
The current ETS for aviation has some serious shortcomings. 70% of CO2 emissions remain unpriced since long-haul flights are not included in the pricing scheme. Extending the scope of the EU ETS could have unlocked a further €7.5 billion in revenues in 2024 to fuel the green transition of the European aviation industry.
Secondly, jet fuel should be taxed under the Energy Taxation Directive. While everyone pays tax to fill up their cars, airlines get away with paying nothing when they refuel.
Thirdly, VAT must be applied to all international flights.
The VAT exemption for aviation comes at a high cost to public finances. T&E estimates that only €1.4 billion in VAT was collected from air travel in 2024. Removing the exemption and applying a standard 20% VAT rate to all tickets departing from the EU would have raised more than €30 billion, leaving a VAT gap of around €29 billion in a single year.
These tax exemptions keep plane tickets artificially cheap, boosting demand and driving up CO2 emissions. At the same time, governments are being deprived of a vital, reliable source of tax revenue.
Aviation taxes, including VAT and ticket taxes, are applied unevenly across the EU, leading to large differences in the tax burdens on air travel.
There are large disparities in how European countries tax flight tickets. Ticket taxes should be implemented at national level to compensate for aviation’s tax exemptions mentioned above. In order to close the tax gap of 34 billion, countries should introduce ticket taxes of: €23 for a domestic journey, €51 for an intra-European journey and €259 for an extra-European journey.
Private jets are barely taxed at both EU and national level. This despite the fact they are 5-14 times more polluting than commercial planes per passenger and 50 times more polluting than trains.
In 2016, the International Civil Aviation Organisation agreed the outlines of a global market-based measure to address CO2 emissions from international aviation, starting as a voluntary measure from 2021. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) aims to stabilise CO2 emissions at 2019 levels.
CORSIA is, however, fundamentally weak. It only applies to the growth of emissions (above a baseline of 85% of 2019 emissions).
Furthermore, there are still questions remaining about key aviation markets participating in CORSIA. China, Brazil, Russia, India and the USA have not currently implemented CORSIA into national law.
Finally, a scheme that relies on offsets with questionable environmental integrity cannot deliver on reducing the aviation sector’s emissions.
