A proposed 10-year tax holiday on aviation and shipping fuels is sparking debate across the European Union, as governments weigh climate goals against economic competitiveness. At the heart of the discussion is a draft plan to delay EU-wide levies on CO2-emitting fuels, which many argue are long overdue. The exemption would give airlines and shipping companies a decade more of tax-free operations, even as other sectors face stricter climate-related costs. Supporters say the pause will protect jobs and industry, while critics warn it undermines the EU’s green ambitions. As negotiations continue in Brussels, the outcome could reshape Europe’s approach to balancing climate policy and economic interests.
European Union countries are considering a 10-year delay to the introduction of EU-wide taxes on aviation and shipping fuels as they seek to push long-delayed energy tax reforms over the line, a draft document seen by Reuters showed.
The European Commission proposed an overhaul of energy tax rules in 2021 to align with efforts to limit climate change. This included gradually introducing taxes on CO2-emitting fuels for flights and shipping within the 27-nation bloc, which currently escape EU-wide minimum levies.
Governments resisted the changes, and are now considering a delay of 10 years in which aircraft and shipping fuels would maintain their existing EU tax exemption, a draft EU negotiating proposal showed.
“In 2035, the Commission should examine the possibility of taxation of air navigation and waterborne navigation and propose amendments to this Directive, where appropriate,” it said.
EU countries’ negotiators will discuss the compromise at a meeting in Brussels on Friday.
Only small aircraft with a maximum of 19 seats, and boats defined as “private pleasure craft”, may face taxes before the 10 years are up, the draft said.
The exemption is designed “to maintain the competitive position of Union companies,” it said.
The EU already applies minimum tax rates to other fuels, such as electricity and petrol used in cars. Climate campaigners have long called for tax changes to promote cleaner fuels over the dirtiest and least energy-efficient.
But changing EU tax policy is fiendishly difficult because it requires unanimous approval from all EU countries.
Countries with large shipping sectors and those with large tourism sectors have resisted the changes, EU diplomats said.
A previous proposal to temporarily exempt island nations such as Ireland and Malta, and countries with island territories like Spain, also failed to win enough support among governments.
The latest document was drafted by Denmark, which holds the EU’s rotating presidency. A spokesperson for Denmark’s EU presidency said it aimed for countries to reach a deal on the tax changes in November.
Original article published on reuters.com
