Cyprus among EU states to benefit from jet fuel tax exemption

European Union countries are negotiating exemptions for a proposed EU-wide tax on polluting aviation fuel for islands, in a move that could benefit countries such as Ireland, Cyprus, Malta, Spain and Greece, a draft document showed.

The European Commission proposed an overhaul of energy tax rules in 2021 to make them more climate-friendly, including by gradually introducing taxes on fuels for flights within the 27-nation bloc, which currently escape EU-wide levies.

A compromise proposal, seen by Reuters and drafted by Belgium which holds the EU’s rotating presidency, showed countries are now negotiating softer rules for islands – both island nations and countries including island territories – reliant on aviation and shipping for transport and trade.

The draft compromise would exempt islands from the jet fuel tax until 2032. For other countries, a minimum EU tax rate would apply from 2028, and gradually increase, while EU member states would also have the option to introduce their own national levies immediately after the policy is adopted.

The changes aim to win support from island nations that have expressed concerns the policy would hit their economies particularly hard. Islands would also receive some exemptions from EU minimum tax rates on shipping, under the draft compromise.

Changing EU tax policy is fiendishly difficult because it requires unanimous approval from all EU countries – meaning any one government can block it.

Exempting islands could, however, hamper the policy’s ability to reduce greenhouse gas emissions.

Flights to and from islands account for around 22 per cent of all fuel use from flights inside the EU, campaign group Transport and Environment said.

EU country diplomats were set to discuss the compromise on Thursday, after which, if countries appeared likely to support it, the compromise could be sent to their ambassadors for approval.

Some EU diplomats have previously warned against pushing through measures that could raise fuel prices for voters, ahead of European Parliament elections in June.