France Reveals Plans To Introduce an Eco Tax on Flights

 - July 9, 2019, 1:45 PM

France on Tuesday joined a growing list of European countries to impose an environmental tax on airline tickets, a move that Air France said will represent an additional cost of more than €60 million ($67.3 million) per year. “This new tax would significantly penalize Air France's competitiveness, at a time where the company needs to strengthen its investment capacity to more rapidly reduce its environmental footprint, notably as part of its fleet renewal policy,” France’s largest airline said.

Moreover, the Paris-based operator pointed out, Air France has been contributing to the European Union's Emissions Trading Scheme (ETS) since 2012 and will contribute to ICAO’s CORSIA scheme for international flights as from 2021. It estimates that the cost for offsetting CO2 under CORSIA and buying carbon allowances for the CO2 emitted on intra-European Economic Area (EEA) flights under the ETS will amount to €200 million in 2025 for the Air France-KLM Group. EU carbon prices averaged €24 per tonne for the first half of 2019, compared with €12 for the same period in 2018, according to recent data by Eurocontrol.

Air France group—which comprises Air France, its regional subsidiary HOP! Air France and Transavia—“is committed alongside all the industry players to reducing its CO2 emissions by 50 percent by 2050, in accordance with the Paris climate agreement objective,” the company stressed.

France’s transport minister Elisabeth Borne, however, advocated the introduction of  the eco-levy because there is a “feeling of injustice among our citizens regarding the taxation of airline transport.” France, she explained, committed to an EU-wide taxation on air transport “but there is urgency. Also, we have decided like other countries to introduce a progressive eco-contribution.” The Netherlands in May published a legislative proposal introducing an aviation tax on flights leaving the country.

At the May meeting of EU transport ministers, Borne suggested imposing a tax on kerosene across the bloc to reduce air transport’s impact on climate change.

The new eco-aviation tax will raise €182 million annually and proceeds will be spent on improving infrastructure for more environmental modes of transport like rail, she said.

This also did not go down well with Air France, which contended the funds should be used to support the implementation of sustainable biofuel industries or disruptive innovations in the air transport sector.

The proposed eco-tax tax ranges from €1.5 intra-EU—including domestic—flights and €3 on ex-EU in economy class to €9 on intra-EU business-class tickets and €18 on international business-class flights. It will be levied on flights leaving France though transfer flights are exempted. The planned tax also won’t apply to Corsica and French overseas territories, Borne said.

The levy, which is due to come into force next year, will apply to all airlines flying out of France but it will affect Air France more severely as 50 percent of its flights are operated out of France. The measure will be particularly damaging for its domestic network, where losses amounted to above €180 million in 2018 due in part to competition from the high-speed rail that is expanding its coverage in the hexagon. Some French members of parliament in May proposed to outright ban domestic air travel on distances that could be covered by rail in a reasonable timespan.