Monday, July 19, 2021

The European Aviation Fuel Tax May Double The Cost of Some Tickets

At least they're exempting private jets

From S&P Global Platts:

A proposed new tax on traditional aviation fuel put forward by the European Commission could add around Eur35 to the cost of a return Paris to Rome flight, doubling the cost of low-cost ticket prices, S&P Global Platts calculations show.

The European Commission July 14 unveiled a bold plan for cutting carbon emissions as part of the EU Green Deal and "Fit for 55" legislative package, which are targeting reduction in CO2 of at least 55% by 2050.

Decarbonizing the aviation sector is one of the more ambitious targets set out in the plan. This is not to say the commission expects carbon reduction will be brought about by technological advancement alone—a reduction in flying is also expected.

"The airline is expected to pass through the cost to consumers by raising ticket prices, leading to a reduction in passenger demand and hence fuel consumption," according to the document laying out the proposed fuel tax changes.

Fuel duty shake-up

As part of this strategy, proposals for revising current taxes on energy products were released. The European Tax Directive (ETD) currently does not distinguish between fossil fuels and any renewable fuel that has emerged since the last update in 2003.

Meanwhile, individual countries were left to decide on exemptions and reductions, resulting in many exemptions for fossil fuels. In the European Commission's words: "the ETD de facto favors fossil fuel use".

An overhaul to the ETD will see a minimum tax rate of Eur10.75/gigajoule across Europe introduced on traditional aviation fuel, ramping up from 2023 to 2033, while greener alternatives such as sustainable aviation fuel (SAF) will benefit from a zero minimum tax rate. Fuels will be taxed based on their energy content, with diesel charged at the same minimum rate as jet fuel.

Potential cost to passengers

Jet fuel currently has no duty attached, so what does this plan mean for consumers and ticket prices?

The new jet fuel duty would be the equivalent of 38.64 euro cents/litre using the minimum energy density of jet A-1, the standard specification for traditional jet fuel.

Alongside the costs for jet fuel, S&P Global Platts looked at diesel duty changes, for comparison to a transport fuel on which consumers are used to paying a large percentage of duty. Diesel fuel duty in France as of July 2021 is 60.90 euro cents/litre according to the petroleum industry union, UFIP, while the new proposed minimum would be equivalent to 41.42 euro cents/litre. The current minimum duty for diesel is much lower than what is charged by each nation, since it has not been updated since 2003 and no longer functions as a floor to taxation.

Now, the consumption of fuel per passenger in an aircraft is different to that of a car or train. The volume of jet fuel consumed is around 4.06 litres/100 km, according to the International Council on Clean Transportation. Diesel consumption will be more familiar as the miles per gallon figure quoted in the UK. This has a current average in new cars of 55.4 mpg or 5.1 litres/100 km, according to RAC, a motoring association.....

....Taking the price increase from ETD alone, the duty on fuel used for a flight from Paris to Rome at 1,113 km would be Eur17.47, or Eur34.94 for a return. Return flights from Paris to Rome in September 2021 are listed as low as Eur22.16....


Also at Platts' Insight blog:
Commodity Tracker: 4 charts to watch this week

And on the private jet exemption see Argus Media, July 6:
EU draft exempts private jets, cargo from jet fuel tax

HT: Guido Fawkes who was so incensed they made the story a stand-alone at Euro-Guido:
EU to Exempt Private Jets from Jet Fuel Tax