Global Policy Forum

An unpublished European Commission study claims that Europe's aviation industry would be put at an unacceptable competitive disadvantage if the EU were to unilaterally introduce an aviation fuel tax. The EU is considering options to reduce environmental impacts from aviation in the light of the industry's rapid growth and limited progress being made towards an international legal framework under the International Civil Aviation Organisation (ENDS Daily 1 September 1998). The study's conclusions make it likely that the EU will look for alternative strategies to taxing aviation fuel, Commission officials told ENDS Daily today.

The report was commissioned from an independent consultancy by the EU executive's transport directorate (DGVII) and completed two months ago, according to officials. However, its publication was blocked following the resignation of all 20 EU commissioners in March.

It was designed to underpin two Commission communications that were due for publication around now - one from DGVII on air transport and the environment, the other from the Commission's tax directorate (DGXXI) on fuel taxation. Both documents will remain on ice until a new Commission has been appointed, an official told ENDS Daily. Publication of the communications and the research paper are now expected this autumn, he said.

According to Commission officials, the report found that it would be politically impossible to impose a general tax on all kerosene (aviation fuel) sold in the EU because of long-standing international agreement that aviation fuel should be available tax-free. The only realistic option would be to tax EU carriers only, while providing tax-free fuel to non-EU airlines. The paper concluded that this would put EU airlines at an unfair disadvantage and would have only limited impact on demand - the equivalent of holding back the predicted growth of air traffic by two years.

A DGVII official told ENDS Daily that the his directorate would put forward a list of alternative policy options in its communication. These would include passenger charges, take-off and landing fees and "en-route" emissions taxes - under which a variable, mileage-based charge would be applied to an aircraft depending on how much pollution it produces. The latter policy is being recommended by the NGO European Federation for Transport and Environment, though the group is also campaigning for an EU tax on kerosene. In its own research it found that out of all the policy options, emissions charging would be the least disruptive to competitiveness (ENDS Daily 23 March 1998).

In a separate proposal from the European Commission on taxing energy products - the "Monti" proposal - EU member states would be allowed to tax kerosene sold for domestic flights, or for those within the EU where it had been agreed between the two countries concerned.

Contacts: European Commission, tel: +32 2 295 1111.

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