European Union member states are weighing a proposal to delay the introduction of bloc-wide taxes on aviation and shipping fuels for a decade, according to a draft text prepared under Denmark’s EU Council presidency.
The measure, if adopted, would extend the longstanding exemption from minimum energy tax rates currently enjoyed by the aviation and maritime sectors until 2035. The draft document, seen by Reuters, indicates that the European Commission would only reassess the possibility of imposing such levies after that date.
Energy Tax Reform Stalled Since 2021
The European Commission first proposed a comprehensive revision of the EU’s energy taxation directive in 2021. The plan was intended to align taxation with climate objectives, by removing exemptions for fossil fuels and ensuring that cleaner alternatives would become more competitive.
At the heart of the proposal was the gradual introduction of EU-wide minimum taxes on carbon-intensive fuels used in aviation and shipping. These fuels are currently excluded from the bloc’s minimum tax regime, unlike electricity and motor fuels such as petrol and diesel.
However, progress on the file has been slow. Because tax policy requires unanimity among the 27 member states, national concerns have repeatedly blocked agreement. Countries with large shipping industries or tourism-reliant economies have been particularly resistant, diplomats said.
Exemptions to Continue Until 2035
The Danish draft compromise envisages that aviation and shipping fuels would remain exempt for 10 years, with only two exceptions. Taxes could be levied on small aircraft carrying a maximum of 19 passengers, as well as on boats classified as “private pleasure craft.”
The text states: “In 2035, the Commission should examine the possibility of taxation of air navigation and waterborne navigation and propose amendments to this Directive, where appropriate.”
The justification given is to “maintain the competitive position of Union companies” in the global marketplace, where fuel taxation practices vary widely.
Political Sensitivities
The negotiations reflect the difficulty of reconciling environmental objectives with the economic priorities of individual member states. Shipping nations such as Greece, Cyprus and Malta, as well as countries heavily dependent on air travel and tourism, including Spain, Portugal and Croatia, have raised objections to imposing new costs on their industries.
An earlier proposal to introduce temporary exemptions for island nations such as Ireland and Malta, and for countries with remote territories, failed to secure enough backing among governments.
The latest draft, prepared by Denmark as holder of the EU’s rotating presidency, aims to break the impasse. A spokesperson for Copenhagen said the presidency hopes to secure a final agreement among finance ministers in November.
Broader Context
The EU already applies minimum tax rates to most energy products, including motor fuels and electricity. Supporters of extending taxation argue that the current exemptions for aviation and shipping create distortions and undermine the bloc’s climate goals.
Climate groups have long criticised the absence of EU-wide fuel taxes in these sectors, pointing out that they are among the fastest-growing sources of greenhouse gas emissions. They have urged Brussels to incentivise cleaner alternatives, such as sustainable aviation fuels or low-emission shipping technologies.
The Commission’s 2021 proposal was part of a wider package of legislation intended to implement the EU’s target of cutting net greenhouse gas emissions by 55 per cent by 2030, compared with 1990 levels. It included revisions to emissions trading, energy efficiency rules, and renewable energy targets.
Outlook
The compromise text will be discussed by national negotiators in Brussels on Friday. Whether it will prove acceptable to all 27 capitals remains uncertain, given the need for unanimity in tax matters.
If endorsed, the decision would postpone any significant shift in fuel taxation for aviation and shipping until at least the middle of the next decade. This would represent one of the longest exemptions in EU energy policy, underscoring the political and economic weight of the two sectors.
The Commission would then be tasked with reviewing the situation in 2035, potentially proposing new legislation to bring these fuels under the scope of the energy taxation directive.
Until then, the debate highlights the challenge the EU faces in aligning its fiscal framework with its climate ambitions, while balancing the concerns of industries and member states whose economies depend heavily on air and sea transport.
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