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Winners and Losers in the Aviation Tax Wars

Posted on Aug. 29, 2019

If Elton John offered you a trip on a private jet, would you take it?

When faced with that decision, Britain’s Prince Harry and his wife Meghan Markle did what most of us would do: They accepted John’s offer and flew to the south of France, where they spent several days unwinding in his summer villa.

Unfortunately for the couple, several days later the paparazzi spotted Harry’s brother, Prince William, traveling to Scotland on an unassuming budget airline, Flybe, with his family in tow. The press howled at the comparison, even after John dashed off some angry tweets excoriating the media for hounding Harry much like they did his late mother, Princess Diana. John further explained that the flight was carbon neutral because he contributed money to Carbon Footprint, a project that allows individuals to fund carbon-offsetting activities.

Environmentalists at Greenpeace scoffed a bit. Although offsetting is a legitimate endeavor endorsed by the United Nations, some feel it’s more of a measure of last resort — tackling emissions tit for tat using offsets is not as effective as reducing CO2 emissions in the first place.

But the broader issue of aviation pollution is very salient for European countries, and some think aviation taxes could be a solution. According to the latest European Aviation Environmental Report, emissions from flights departing from EU locations increased by 10 percent between 2014 and 2017. Several EU countries already tax aviation, but jurisdictions are now looking more closely at how they can tackle the specific issue of aviation emissions.

France recently announced a climate-related measure set for 2020 that will tax passengers on flights out of the country. The amount will depend on the destination and the passenger’s fare class. At the high end, passengers traveling in business class to destinations outside the EU could see €18 added to their ticket. The proceeds will be used to invest in cleaner forms of transportation. Clearly, the measure isn’t meant to disincentivize air travel — a few extra euros per flight will not be a breaking point for airline travelers, who choose to fly because they have the means and value the efficiency. Instead, the tax is meant to impose a little responsibility on those who have the luxury of using an environmentally unfriendly mode of transportation.

Germany and the Netherlands are both focused on implementing aviation taxes to drive down emissions, and Switzerland is also considering an airline passenger tax. The European Commission is weighing its options and hopes to implement a harmonized, EU-wide solution. As the EU moves forward, however, it will have to carefully consider how to balance the need for climate action against the tendency to target the lowest-hanging fruit — taxing consumers instead of the airlines. Notably, the EU’s energy tax directive exempts aviation fuel, a huge issue that must be resolved.

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