EU Climate Commissioner Advocates for Taxation Alignment with Climate Goals
The European Union’s climate commissioner has committed to utilizing an expanded portfolio to ensure that taxation policies are in sync with the EU’s climate objectives. He has reaffirmed the EU executive’s determination to propose a substantial 90% reduction in emissions by the year 2040. In written responses to Members of the European Parliament (MEPs) released today, he stated, “I strongly believe that taxation is a key pricing instrument for driving climate goals.” He emphasized the potential of taxation to act as a catalyst for transformation, motivating both individuals and businesses to adopt more sustainable practices.
The Dutch former finance minister, who assumed the role of the EU’s chief climate official last year following the departure of his compatriot Frans Timmermans, has been designated by European Commission President Ursula von der Leyen as the commissioner for both climate and taxation in her second term. His communication to members of the European Parliament’s committees on environment, industry, and economics comes ahead of a crucial three-hour confirmation hearing scheduled for November 7. However, his message also reflects the challenges ahead as he navigates complex negotiations.
This morning, an EU Council working group convened behind closed doors to discuss a renewed initiative led by Hungary’s current presidency to resolve an ongoing stalemate among governments regarding the reform of the Energy Taxation Directive. Their previous attempt to reach a consensus on the last component of the ‘fit for 55’ legislative package—designed to achieve the EU’s 2030 emissions reduction target—was met with significant backlash from climate advocates. They had proposed postponing the establishment of EU-wide minimum tax rates for kerosene and bunker oil used in aviation and shipping until 2049, which sparked outrage among environmentalists and divided member states.
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In a new compromise proposal dated October 18, which was reviewed by Euronews, Hungary acknowledged that “some delegations are not in a position to accept the abolition of the mandatory tax exemptions currently applicable in the aviation and maritime sectors,” even by the proposed date. The suggestion now is to drop the idea altogether while planning a review for 2035 instead. A source familiar with the ongoing discussions indicated that they were inconclusive, necessitating “more technical and political discussions before any agreement can be reached.”
Hoekstra, the commissioner designate, appears determined to keep the issue on the agenda. He stated, “As for taxation in the aviation and maritime sectors, I will not conceal the significance I place on taking action in these areas.” His focus extends beyond fuel taxes; he also criticized the “widespread application of zero VAT rates, especially for international air and maritime transport, irrespective of their environmental consequences.”
The challenge he faces, should he receive the European Parliament’s endorsement, is that taxation remains predominantly a national prerogative under EU treaties. This means that any legislation at the European level necessitates the agreement of all 27 member states. Hoekstra confirmed that the Commission will propose a legally binding target for 2040 that aims for a 90% reduction in greenhouse gas emissions compared to the 1990 baseline, effectively reducing current output to approximately one-seventh of today’s levels. The existing 55% target for 2030 requires emissions to be nearly halved by the end of the decade.
To facilitate this ambitious agenda, the commissioner designate aims to foster consensus within the EU Council while simultaneously “safeguarding a high level of ambition” in the energy taxation reform. Jo Dardenne, who oversees aviation at the Brussels-based NGO umbrella group Transport & Environment, remarked that the taxation of transport has been “completely misaligned” with EU climate policy for decades. She noted, “Whether through subsidies for polluting company cars or the under-taxation of kerosene, high-polluting activities do not bear the cost of their climate impact.” Dardenne added that the current framework hinders progress towards cleaner transportation methods.
She urged that government delegates involved in the EU Council negotiations on energy tax reform should work to “correct this injustice.” Dardenne suggested that “the revenues from a kerosene tax could then be reinvested in cleaner transport alternatives like rail or in the decarbonization of the aviation sector itself.”