EU Countries Negotiate Exemptions for Aviation Fuel Tax on Islands

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European Union (EU) countries are currently in negotiations to secure exemptions for a proposed EU-wide tax on polluting aviation fuel for islands, according to a draft document seen by Reuters. This move could potentially benefit countries such as Ireland, Cyprus, Malta, Spain, and Greece. The proposed EU tax overhaul, scheduled for 2021, aims to make energy tax rules more climate-friendly by gradually introducing taxes on fuels for flights within the 27-nation bloc, which are currently exempt from EU-wide levies.

The draft compromise, drafted by Belgium (which holds the EU's rotating presidency) and viewed by Reuters, reveals that countries are now seeking softer rules for islands, both nation-states and countries with island territories, heavily dependent on aviation and shipping for transport and trade.

Under the proposed compromise, islands would be exempt from the jet fuel tax until 2032. Other countries would be subject to a minimum EU tax rate beginning in 2028, with a gradual increase over time. Individual EU member states would also have the option to introduce their own national levies immediately after the policy is adopted.

The goal of these changes is to gain support from island nations concerned about the detrimental impact of the policy on their economies. In addition, islands would also receive some exemptions from EU minimum tax rates on shipping, according to the draft compromise.

However, it is worth noting that exempting islands could potentially hinder the policy's effectiveness in reducing greenhouse gas emissions. According to campaign group Transport and Environment, flights to and from islands account for approximately 22% of all fuel consumption from flights within the EU.

The challenge of implementing changes to EU tax policy lies in the requirement for unanimous approval from all member states. Thus, any single government has the power to block such measures.

EU country diplomats were scheduled to discuss the compromise proposal on Thursday. If there appears to be support for the proposal, it may be sent to ambassadors for approval. However, some EU diplomats have previously cautioned against implementing measures that could increase fuel prices for voters ahead of the European Parliament elections in June.

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