Will Having a Minimum Tax Rate for Polluting Aviation Fuels Make Any Difference?
There is indeed a lot happening to our environment. Mankind has been blessed with many natural resources, but we have left no stone unturned in exploiting these resources over time. Actually, we have long reached a stage of not looking back. If we do not take further action at the moment, we would end up going under the drains with nothing left on our side. Verbal communication is surely not effective, and people take it for granted. Hence, we are left with the only option to start thinking outside of the box to avoid such circumstances.
The European Commission is planning to initiate a minimum tax rate for polluting aviation fuels. This will be a step to prevent global climate change, and under this initiative, airlines will be charged for polluting aviation fuel. The goal of the program is to encourage the airlines to use sustainable alternative fuels. This policy is a part of the “fit for 55” legislative package and aims to reduce the EU carbon emission by almost 55%.
Carbon emission causes global warming and harms the environment by the rising sea, melting of ola rise, extreme weather events, and disturbance of the animal’s natural habitat.
Tax Rate for Polluting the Aviation Fuels
The tax for pollution aviation is expected to start at zero in the year 2023. Depending on the environmental impact and fuel energy content, the rate will gradually increase in the upcoming ten years. However, the final tax rate is not mentioned in the draft.
The fuels that cause more pollution will have more taxes. Sustainable fuel, e.g., renewable hydrogen and biofuels, will be exempted from the ten-year tax rate. Some flights will be taxed on a national basis, including pleasure flights, cargo flights, and business aviation.
The tax would also be imposed on a national basis for polluting fuses used for navigation, fishing, or waterborne cargo. The EU Commission has not commented on the draft so far. Implementation of this policy can be a little difficult, and the approval would also not be easy. Any change in the tax rate required approval from the 27 EU countries, which seems a little complicated.
EU countries are majorly responsible to impose the tax rate. Brussel can set the bloc-wide minimum tax rate. Sustainable fuels are not used by most airlines as they are expensive. Currently, less than 1% of the airlines in Europe use sustainable energy. However, things may change as the airline company would be expected to use as much sustainable fuel as possible, increasing the demand and reducing pollution.
Is It Politically Difficult?
Yes, imposing a tax on polluting aviation fuels can be difficult as all 27 EU countries must agree to it. This is true even though the aim of this policy is quite noble, i.e., to reduce carbon emission and to use sustainable fuels. Still, countries can prevent damage to the environment by changing behaviour by incentivising the companies and people and encouraging them to adopt an alternative that emits less carbon to protect the environment.
Taking care of the environment is a social responsibility, and every nation or every country should contribute to it. A positive change is expected through policy mix and the taxation initiative on transport, energy, and resources.
What Type of Tax is the Tax for Polluting Aviation Fuels?
The tax for polluting aviation fuels is a form of green taxation. Green taxation helps to promote the use of sustainable alternatives and helps to balance the revenue for the EU member states. It also supports and allows EU countries to cut deformed taxes.
EU green taxation will not only help the environment but also will help the EU countries to recover from COVID19.
The EU nations suffered a lot during the pandemic, and there was a substantial economic loss due to the lockdown. This transitional change in behaviour will also need significant societal change. Humans have exploited nature for a very long time, and measures to restore it should be taken. This green taxation policy is perfect and will include a broad range of instruments like standards instruments, investment in the public, and subsidies.
Future Tax Policy
This tax policy for polluting aviation fuels will also help address the problem of the individual nations of the EU state. The greenhouse tax would be most felt by the state emitting more carbon. The policy will also support investments in infrastructures like public transports.
The EU’s flagship Recovery and Resilience Facility has allowed every member state to recover from the COVID 19 pandemic in a green way by collecting environmental taxes. RRF aims to make the countries more resilient, sustainable and restore future challenges through this policy. It also provides an opportunity for the member states for digital transition and that too in a fairway.
Usually, low-income households are majorly affected by pollution. Solving the problem of pollution through innovative taxation and market instruments is very fair to society.
The EU Commission encourages the nations to design a green tax that is appropriate to raise the revenue needed and help remove fossil fuel use. Through this policy, people who do not pay attention to the environment will bear the consequences through taxation.
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