EU draft exempts private jets, cargo from jet fuel tax

Spanish Market: Emissions, Oil products
06/07/21

The European Commission has proposed exempting private jets and cargo flights from the planned EU jet fuel tax. A draft indicates that the tax would be phased-in for passenger flights, including ones that carry cargo.

The draft, which the commission will on 14 July present with its proposed revisions to the bloc's 2003 energy-taxation directive, indicates there could be an exemption from taxation for energy products and electricity used for intra-EU air navigation of cargo-only flights. It proposes allowing EU states to only tax such flights either domestically or by virtue of bilateral or multilateral agreements with other member states.

The commission is worried that taxing fuel for cargo-only flights would adversely affect EU carriers. Third-country carriers, also with a significant share of the intra-EU cargo market, have to be exempted from taxation due to aviation services agreements, the commission argues.

Private jets will enjoy an exemption through classification of "business aviation" as the use of aircraft by firms for carriage of passengers or goods as an "aid to the conduct of their business", if generally considered not for public hire. A further exemption is given for "pleasure" flights whereby an aircraft is used for "personal or recreational" purposes not associated with a business or professional use.

Non-governmental organisation Transport & Environment (T&E) called the proposal "generally good".

"The downside, though, is the commission is considering exempting cargo carriers that are often US-run," said its aviation director Andrew Murphy, who noted "multiple" solutions for taxing jet fuel used by cargo carriers that "tend to use older, dirtier aircraft".

In May, Murphy co-authored a report indicating that private-jet CO2 emissions in Europe rose by 31pc between 2005 and 2019, with flights to popular destinations up markedly during summer holiday seasons. He has argued for a fuel tax for this "leisure-driven" private jet sector.

Airlines for Europe (A4E) fears that setting minimum tax rates for intra-EU flights could lead to distortion of competition. The industry association, which counts 16 airline groups as members including Ryanair, Air France/KLM, Lufthansa, IAG, easyJet and Cargolux, indicated that the commission's proposal could lead to aircraft deliberately carrying excess fuel bought outside the EU specifically to avoid the bloc's jet fuel tax.

Airlines should not pay extra under the revised energy taxation directive when they are already paying for CO2 under the EU's emissions trading sytem (ETS) and participating in the International Civil Aviation Organisation's Carbon Offsetting and Reduction Scheme for International Aviation (Corsia).

More generally, the commission sees collection of aviation fuel tax as not problematic, with fuel suppliers collecting it and transferring to relevant tax authorities. The commission estimates the administrative cost of this at 0.65pc of revenue.

The draft may change before 14 July, and does not contain the all-important annexes with tax rates. To enter into force it must be approved by all 27 EU member states, and it may change markedly over the coming months. A commission proposal made in April 2011 to update EU energy taxation rules failed after finance ministers could not agree by unanimity in 2014.

The commission wants to align energy taxation with EU climate goals, meaning that taxes should be based on the net calorific value of the energy products and electricity and that minimum levels of taxation across the EU would be set out according to environmental performance and expressed in €/GJ. These minimum levels should be aligned annually on the basis of the EU's harmonised index of consumer prices, excluding energy and unprocessed food.

Next week, the commission will propose changes to the EU's emissions trading system (ETS). A draft of these did not detail how aviation will be treated, but no free allocations are envisaged for maritime, road transport and buildings sectors. Officials will also present the commission's mandate for sustainable aviation fuels (SAF), whereby all firms could be expected to fill up with blended jet fuels at EU airports.

By Dafydd ab Iago

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

02/04/25

Mexico manufacturing extends contraction in March

Mexico City, 2 April (Argus) — Mexico's manufacturing sector contracted for a 12th consecutive month in March, with production and employment both deepening their slides, according to a survey released today. The manufacturing purchasing managers' index (PMI) ticked up to 47.2 in March from 47.1 in February, but remained below the 50-point threshold between contraction and expansion, according to the latest PMI survey from the finance executive association IMEF. Manufacturing, which accounts for about a fifth of Mexico's economy, is led by the auto sector, contributing about 18pc of manufacturing GDP. Within the manufacturing PMI, the new orders index rose by 1.3 points to 45.3, still deep in contraction. Meanwhile, production fell by 0.6 points to 44.6. The employment index also declined 0.6 points to 46.4 in March, now in contraction for 14 consecutive months. Meanwhile, the non-manufacturing PMI — covering services and commerce — declined 0.8 points to 48.8 in March from 49.6 in February, holding in contraction for a fourth consecutive month. Within the non-manufacturing PMI, new orders fell 1.5 points to 48.2 and production declined 1 point to 47.5 with employment down a point as well in March to 47.5, as all three pushed deeper into contraction. In contrast, the inventories component rose 3.5 points to 50.6 into expansion territory in March. But this may be the result of company strategies to stockpile inventories ahead of US tariffs and the reciprocal measures Mexico is set to announce on 3 April, IMEF technical advisory board member Sergio Luna said. PMI data show that the economic stagnation that began in late 2024 persisted through March, with results from January and February pointing to a sharp slowdown in the first quarter, IMEF said. This follows annualized GDP growth of 0.5pc in the fourth quarter of 2024, slowing from 1.7pc in the third quarter, according to national statistics agency data. Luna said concerns over US tariffs continue to drive much of the uncertainty reflected in the PMI data. Internal factors — such as reduced government spending to contain the fiscal deficit and investor unease over judicial reforms passed last year — are also weighing on activity, Luna added. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Article 6 credits 'could provide CBAM cost flexibility'

02/04/25

Article 6 credits 'could provide CBAM cost flexibility'

Lisbon, 2 April (Argus) — Allowing the use of credits issued under Article 6 of the Paris climate agreement for compliance with the EU's carbon border adjustment mechanism (CBAM) could provide flexibility for developing countries that lack the capacity to set up their own carbon pricing systems in response to the measure, delegates at a conference in Lisbon, Portugal, heard today. The CBAM regulation provides for a carbon price already paid on a product in its country of origin to be deducted from CBAM costs, providing an incentive for countries importing products covered by the measure to the EU to introduce equivalent carbon pricing systems. But developing countries often lack the capacity to enact such policies, the chief sustainability and innovation officer at ACT Group, Federico di Credico, told delegates, and allowing the use of Article 6 credits for compliance could provide an alternative. This could in one form take place implicitly, di Credico said, if CBAM liabilities are adjusted down in relation to pricing systems that themselves allow some compliance using Article 6 credits. An example of this is Singapore, where 5pc of the country's carbon tax can be offset through the purchase of Article 6 internationally traded mitigation outcomes (Itmos). A more direct inclusion of Article 6 credits for compliance could entail a calculation on a euro-for-euro basis, di Credico suggested, for example reducing a CBAM liability of €100 to €50 if the importer has purchased €50-worth of Article 6 credits. Using a tonne-for-tonne basis would not work because the CBAM is not volume based, he said. But the uncertainty surrounding Article 6 credits means that their inclusion would bring an added layer of complexity to the CBAM, Cedric de Meeus of cement producer Holcim said. Article 6 credits are not usable in the EU emissions trading system (ETS), which forms the reference price for the CBAM, he pointed out, while not all activities producing Article 6 credits would be equivalent to the deep decarbonisation being carried out by European industry. It remains unclear how the EU will take into account carbon prices in other jurisdictions for the purposes of the CBAM. The CBAM regulation includes the ability to credit a "carbon price… effectively paid in the country of origin" but does not define what falls within this term, and the implementing regulation that will provide further detail on the matter has not yet been tabled. Article 6 of the Paris deal provides for two carbon pricing mechanisms allowing countries to collaborate voluntarily to reduce their emissions. Article 6.2, which is already fully operational, produces Itmos through bilateral agreements on emissions reduction or removal projects, while Article 6.4 establishes the soon-to-be-implemented Paris Agreement Crediting Mechanism (Pacm), a UN-regulated global carbon crediting system. By Victoria Hatherick Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Transition technology draws energy R&D spend: IEA

02/04/25

Transition technology draws energy R&D spend: IEA

London, 2 April (Argus) — Public and corporate spending on energy research and development (R&D) is "trending upwards", with a focus on "low-emissions" technology, but venture capital investment in energy start-ups dropped last year, energy watchdog the IEA found. Government and corporate energy R&D spending increased to $50bn and over $160bn, respectively, in 2023 — the latest year for which full data are available, the IEA said. There are "early indications of continued growth in 2024", although the pace of growth has "slowed slightly" since 2022, it added. But "the momentum of investing in low-emissions energy technologies has been maintained", partly on the back of climate policy goals, the IEA noted. The share of "low-emissions" energy R&D spending has held at "roughly four-fifths of the global total" in recent years, the IEA said. It defines low-emissions energy as renewable power, grids and storage, energy efficiency, nuclear and "low-emissions fuels". Venture capital investments in energy start-ups totalled around $27bn in 2024, 23pc lower on the year, the IEA found. This reflects the "cyclical nature" of venture capital, as well as a drop in funding owed to inflation, but the trend "could have long-term negative impacts as innovators struggle to scale up high-potential technologies without access to affordable capital", the watchdog noted. The IEA also suggested that "the situation is compounded by uncertainties about political commitments to the climate policies that many start-ups depend on to drive demand". But venture capital financing rose in 2024 for start-ups focused on nuclear, synthetic fuels and carbon capture, use and storage (CCUS), it found. CCUS and "novel CDR" — carbon removal — technologies have drawn more venture capital funding in recent years, and sector R&D "is being spurred on by private capital mobilised by carbon credits", the IEA said. There are multiple ways to capture and store CO2, but many are at very early stages, while most funding goes towards just two approaches — direct air capture and bioenergy with CCS, its report found. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Australia’s gas leaders hit out at market intervention

02/04/25

Australia’s gas leaders hit out at market intervention

Sydney, 2 April (Argus) — Senior figures in Australia's upstream gas sector have hit out at plans for intervention in the heavily regulated industry, as debate continues on how to best address domestic supply shortfalls later this decade. The federal Coalition in March announced National Gas Plan including a 50-100 PJ/yr (1.34bn-2.68bn m³/yr) domestic reservation system aimed at forcing the three LNG exporters based in Queensland's Gladstone to direct more supply to the eastern states' market. But oversupplying the market to drive down prices would destroy the viability of smaller gas projects, Australian independent Beach Energy's chief executive Brett Woods said at a conference in Sydney on 1 April. The domestic-focused firm, which will export some LNG volumes via its Waitsia project in 2025, warns that such a move by the Peter Dutton-led opposition would reduce export incomes while harming Australia's international reputation. The volumes impacted by the policy could reach around 900,000-1.8mn t/yr. Expropriation of developed reserves is equivalent to breaking contracts with LNG buyers and with the foreign and local investors that the country needs for ongoing economic security, Woods said on 1 April. Domestic gas reservation systems put in place by the state governments of Western Australia (WA) and Queensland, designed to keep local markets well supplied, were "clearly supportable", Woods said, but only future supply should be subject to the regulations. LNG terminals, which represent about 70pc of eastern Australia's total gas consumption and shipped 24mn t in 2024 , should not be blamed for the failure of governments to expedite new supply and plan for Australia's gas future, head of Shell Australia Cecile Wake said in response to the Coalition's proposal. Shell's QGC business supplied 15pc of its volumes to the local grid, with the remainder shipped from its 8.5mn t/yr Queensland Curtis LNG project, Wake added. Canberra has moved to promote gas use as a transition fuel to firm renewable energy in line with its 2030 emissions reduction targets, but progress has been slow as reforming laws appear to be hampering development . The state governments, particularly in gas-poor Victoria and New South Wales (NSW), must recognise the need for locally-produced supply and streamline the approvals processes, especially environmental permits, executives said. But despite pleas for an end to years of interventionist policy — including the governing Labor party's measures to cap the price of domestic gas at A$12/GJ , Australia's fractured political environment and rising cost of living has sparked largely populist responses from its leaders. A so-called "hung" parliament is likely to result from the 3 May poll , with a variety of mainly left-leaning independents representing an anti-fossil fuel agenda expected to control the balance of power in Australia's parliament. LNG debate sharpens Debate on the causes of southern Australia's gas deficit has persisted, and the ironic outcome of underinvestment in gas supply could be LNG re-imports from Gladstone to NSW, Victoria and South Australia, making fracked coal-bed methane — liquefied in Queensland and regasified — a likely higher-emissions alternative to pipeline supply. Several developers are readying for this possibility , which is considered inevitable without action to increase supply in Victoria or NSW, increase winter storages or raise north-south pipeline capacity. Australian pipeline operator APA appears to have the most to lose out of the active firms in the gas sector. APA chief executive Adam Watson this week criticised plans for imports, because relying on LNG will set the price of domestic gas at a detrimental level, raise emissions and decrease reliability of supply, Watson said. The firm is planning to increase its eastern pipeline capacity by 25pc to bring new supplies from the Bass, Surat and Beetaloo basins to market. But investment certainty is needed or Australia will risk needing to subsidise coal-fired power for longer if sufficient gas is unavailable to back up wind and solar generators with peaking power, Watson said. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

India's IOC cuts jet fuel prices by 6pc for April

02/04/25

India's IOC cuts jet fuel prices by 6pc for April

Mumbai, 2 April (Argus) — Indian state-controlled refiner IOC has reduced jet fuel prices by 6pc effective from 1 April. IOC cut prices in Mumbai, capital New Delhi, Kolkata and Chennai by 6pc from a month earlier. Prices vary from state to state depending on local taxes. Asian jet fuel margins — or Singapore jet fuel swaps against Dubai crude values — averaged $13.04/bl in March, down from $15.23/bl in February. India's jet fuel consumption stood at 203,100 b/d in March, up by 5pc on the year, provisional data from the oil ministry show. By Roshni Devi Jet fuel prices in India Rupees/kl City Apr-25 Mar-25 m-o-m % Delhi 89,441.18 95,311.72 -6 Kolkata 91,921.00 97,588.66 -6 Mumbai 83,575.42 89,070.03 -6 Chennai 92,503.80 98,567.90 -6 Source: IOC Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more