The European Union is preparing to postpone taxes on aviation and shipping fuels until 2035 under its energy tax reform, a move that significantly delays the implementation of climate-aligned taxation for these sectors. A draft proposal endorsed by Denmark, the current holder of the EU presidency, outlines this extension and is slated for discussion among member states in Brussels, with an aim to reach agreement in November.
The 2021 proposal to revise the Energy Taxation Directive aimed to align the EU’s tax structure with climate goals by introducing taxes on fossil fuels based on environmental impact rather than volume. It sought to eliminate full exemptions for fuels used in intra-EU air and maritime transport, sectors historically shielded from such levies.
In the draft now under discussion, taxes would continue to be waived on aviation and maritime fuels until 2035. Only small aircraft with up to 19 seats and private pleasure boats might be taxed earlier, suggesting selective application of the reform. This extension is presented as a measure to safeguard the competitiveness of EU firms, particularly in heavily tourism-dependent nations and states with major shipping industries, which have resisted tighter taxation.
This delay contrasts with earlier proposals offering shorter exemptions. For instance, in 2024, a possible exemption of up to 20 years was considered, though that draft differed in scope and structure. Meanwhile, industries championing sustainable fuels have advocated for a ten-year exemption period tied to market readiness for alternatives and their cost competitiveness.
Meanwhile, the European Commission’s broader push for energy transition continues: taxation on energy products is being reshaped to reflect environmental performance, dropping exemptions for the most polluting fuel use cases within road transport and heating. And since January 2024, emissions from large ships entering EU ports have been integrated into the Emissions Trading System, further tightening the climate policy net around maritime sectors.
The debate around the ETD reform is unfolding amid the wider climate and industrial strategy under the EU’s Green Deal. The Clean Industrial Deal highlights how lowering energy costs and simplifying state aid rules are key to supporting green competitiveness and clean-tech adoption. Yet the aviation and shipping fuel exemption underscores the challenge of balancing ecological ambitions with economic realities and political unanimity required for tax policy in the EU.
Negotiators face mounting pressure to strike a compromise that satisfies member states wary of imposing burdens on key transport sectors, while still honouring the bloc’s climate objectives. The November meeting in Brussels is expected to be critical in steering the final contours of the energy tax overhaul.
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