(BRUSSELS) The EU is weighing a proposal to keep aviation and shipping fuels exempt from energy taxes for another decade, a move that would delay any bloc-wide minimum excise duties until at least 2035 and reshape how Europe balances climate policy with economic pressures.
A draft compromise circulated under Denmark’s rotating EU presidency would extend the current exemptions in the Energy Taxation Directive (ETD) while carving out limited early taxes for small aircraft and private pleasure boats. EU negotiators plan to debate the text in Brussels in the coming weeks, with the presidency aiming for a deal by November 2025. Because tax rules require unanimous approval from all 27 member states, even one holdout could stall or sink the plan — underscoring how sensitive the issue remains for countries that rely on tourism, export shipping lanes, or budget airlines.
Key elements of the draft and timeline
Under the draft, the European Commission would revisit the question in 2035 through a formal review clause. The text instructs the Commission to “examine the possibility of taxation of air navigation and waterborne navigation and propose amendments,” if needed, at that time. In practice, that means Brussels would push any broad tax on jet fuel or marine fuels to the far side of the next decade.
Negotiators expect intensive talks through the fall, with the presidency’s target a political agreement in November 2025. However, the unanimity requirement means national objections — particularly from tourism- and port-dependent states — could force changes or further delay.
Key elements of the draft include:
– Exemption through 2035 for commercial aviation and shipping fuels under the EU’s minimum excise framework.
– Early minimum taxes only for small aircraft (up to 19 seats) and private pleasure boats.
– 2035 review clause, instructing the Commission to assess whether to propose taxation of air and waterborne navigation at that time.
– Unanimity rule for any ETD amendment, giving each member state a veto.
For the official context and legal baseline, see the European Commission’s page on the ETD revision: European Commission – Energy Taxation Directive Revision.
How this fits with existing climate measures
Even without excise taxes on aviation and shipping fuels, major climate policies already shape costs and incentives.
Aviation:
– The sector within the European Economic Area is covered by the EU Emissions Trading System (ETS); the share of free allowances is shrinking, with full auctioning due from 2026.
– ReFuelEU Aviation mandates sustainable aviation fuel (SAF) targets: 2% in 2025, 6% by 2030, and 20% by 2035.
– SAF is significantly more expensive than conventional jet fuel, and carriers have started adding environmental surcharges to help cover costs.
Shipping:
– From January 2024, large vessels over 5,000 gross tonnage entered the EU ETS with a phased obligation: 40% of 2024 emissions (surrenderable in 2025), 70% for 2025, and 100% from 2026.
– FuelEU Maritime comes into force from 2025, requiring a 2% cut in greenhouse-gas intensity of on-board energy in its first step, with steeper reductions through 2050.
– Low-carbon marine fuels and synthetic alternatives remain costlier than traditional bunkers.
These existing measures mean airlines and shipowners already face rising bills from carbon pricing and fuel mandates, even if no new excise duties are introduced immediately.
Arguments for and against the 10-year extension
Supporters of the extension argue:
– Current measures (ETS and fuel mandates) already put the sectors on a cleaner trajectory.
– Adding an excise tax now could push up ticket prices and freight rates at a fragile economic moment.
– ETS and fuel rules apply mainly within EU jurisdiction, reducing risks of traffic rerouting to avoid taxes.
Critics counter that:
– Keeping fuels excise-free effectively acts as a subsidy for polluting fuels.
– The delay removes a potent policy tool that could accelerate investment in SAF and green marine fuels.
– A long postponement could weaken investor confidence and slow the transition.
Political split:
– Northern EU states generally favor fuel taxation on climate and revenue grounds.
– Southern and tourism-heavy states resist, citing risks to budget travel, ports, and jobs.
– Airlines and shipping operators lobby against immediate excise taxes for competitiveness reasons.
– Environmental NGOs argue exemptions are inconsistent with net-zero ambitions.
Practical impact if the draft is adopted
If the compromise holds:
– Airlines would continue relying primarily on ETS costs and the SAF ramp-up to drive environmental pricing through 2035, rather than facing excise taxes.
– Shipping companies would similarly continue to absorb the ETS phase-in and FuelEU Maritime intensity targets without additional excise duties for at least a decade.
– Consumers and shippers will still see price effects from ETS pass-through and clean fuel blending costs; the absence of a fuel tax simply removes one potential upward pressure.
If talks fail:
– The ETD revision remains stalled and the status quo continues by default, but with continued uncertainty for investment planning.
Legal and market dynamics
Legally, the ETD sets only minimum rates. Member states can set higher national taxes if they comply with single market rules and international agreements. In practice, few governments impose unilateral taxes on aviation or shipping fuels to avoid shifting traffic to neighboring countries. That dynamic is one reason an EU-level agreement is politically preferable for many.
Industry planning:
– Aircraft fleets and vessel investments are long-term and fuel supply contracts are complex.
– Knowing the tax stance (no EU excise tax until 2035, if the draft stands) helps companies map compliance budgets for ETS and fuel mandates and gives suppliers clearer demand signals for SAF and low-carbon marine fuels.
Climate advocates worry that the same clarity will postpone a powerful pricing lever that could speed change.
What to watch between now and November 2025
- Whether a core group of member states hardens around either immediate taxation or a long extension, and whether that group can bring holdouts along.
- Any changes to the draft that alter the scope of the early carve-outs for small aircraft or pleasure boats.
- How airlines and shipowners adjust surcharges in response to ETS tightening in 2025–2026 and to the 2% SAF and maritime intensity targets in 2025.
- Signals from the Commission on the 2035 review, even if formal steps are still years away.
Important: the unanimity requirement means that a single member state can block ETD changes — a political reality that shaped Denmark’s 10-year compromise.
Broader implications
- A formal decision to extend exemptions would send a clear message that the EU will lean on the ETS-plus-standards model through the 2020s and early 2030s.
- If no deal is reached, policy options remain open but uncertainty would persist, complicating investment decisions for carriers and fuel suppliers.
- The EU’s stance may influence other regions: keeping fuel excise off the table could reduce international momentum for taxing aviation or shipping fuels, while a shift toward taxation might spur broader action.
For the authoritative legislative context and status updates, consult the European Commission’s portal on the ETD revision: European Commission – Energy Taxation Directive Revision.
This Article in a Nutshell
A draft compromise under Denmark’s EU presidency proposes extending exemptions for aviation and shipping fuels under the Energy Taxation Directive until 2035, while introducing early minimum excise duties only for small aircraft and private pleasure boats. The text includes a 2035 review clause directing the European Commission to examine potential taxation of air and waterborne navigation. Negotiators aim for a political agreement by November 2025, but any ETD change requires unanimous approval by all 27 member states. Existing climate instruments — notably the EU ETS, ReFuelEU Aviation and FuelEU Maritime — are already raising costs for airlines and shipowners through carbon pricing and sustainable fuel mandates. Supporters argue the exemption avoids economic shocks to tourism and ports; critics say it acts as a subsidy that weakens incentives for investment in SAF and low-carbon marine fuels. If adopted, excise duties would be off the table at EU level until 2035, leaving ETS and fuel mandates as the primary pricing levers; failure to reach agreement would prolong uncertainty for industry investments.
