Energy Taxation Directive joint letter

6 December 2022: A4E, ACI Europe, ASD, CANSO Europe, EBAA, ERA, Hotrec and IATA wrote collectively as representatives of the European aviation and tourism industries to call for adjustments to the Energy Taxation Directive (ETD) ahead of the Economic and Financial Affairs (EcoFin) Council on 06 December 2022.

The revised ETD would remove exemptions for energy products and electricity used for intra-EU air services (with the possibility for Member States to apply the same taxation for extra-EU air services). The introduction of such a ‘kerosene tax’ would be a set back for the decarbonisation efforts of the European aviation industry and, as air transport is governed by international agreements which exclude taxation, put our global competitiveness at stake. Europe’s tourism sector is also heavily dependent on aviation: 59 per cent of all international tourism arrivals rely on air transport.

Therefore, a kerosene tax will be counterproductive and will not help the EU achieve its climate goals. The planned review of the ETD would lead to an estimated additional €4bn annually in costs for airlines in 2030 and up to €5.1bn in 2035. These extra costs will hamper the industry’s ability to invest in concrete decarbonisation measures including SAF, breakthrough technologies and innovative infrastructures. This cost is in addition to the new costs linked to the reform of the EU ETS and the new ReFuel EU Aviation legislation.

The proposal risks resulting in significant carbon leakage, impacting intra-EU travel and travel from the EU to third countries via Union airports. As the tax would be applicable to intra-EU flights only (40 per cent of CO2 emissions in aviation), it will likely lead to more CO2 emissions due to detours and avoidance of the tax. This will add to the carbon leakage problem, whilst affecting the competitiveness of Europe as a place to transit.

The EU should continue to focus on smart economic instruments such as carbon trading (already covered by EU ETS), and offsetting schemes (like ICAO CORSIA) which already impose a high carbon price on aviation and ensure it contributes towards the objective of reducing CO2 emissions in Europe by 55 per cent in 2030.

On 6 December 2022, EcoFin discussed the ETD but progress on this legislative file is still needed.