Pocket drain or green gain? Denmark's tricky tax call

Airports Council International Europe has issued a cautionary note to the Danish Government, discouraging the introduction of a passenger tax averaging 100 Danish krone or $14 (€13.41) on air travel.

The advisory, delivered on Wednesday, emphasizes potential drawbacks, including the undermining of decarbonization, connectivity, and competitiveness in the aviation sector.

According to SchengenVisaInfo.com, only a portion of the proposed tax is allocated to environmental initiatives in Danish aviation, with the majority supporting the welfare system. This distribution raises concerns about the competitiveness of Danish airports, hindering their ability to fund ambitious decarbonization plans.

Aarhus, Billund, Copenhagen, and Roskilde airports, leaders in the industry's decarbonization efforts, aim to achieve net-zero CO2 emissions under their control by 2030. However, the suggested tax is criticized as ill-advised and viewed more as political greenwashing than a genuinely beneficial environmental initiative.

The Director General of Airports Council International Europe, Olivier Jankovec, deems the proposed measure counterproductive, asserting that it will redirect essential financial resources away from the aviation sector. The government's plan involves a gradual phase-in of the passenger tax, commencing in 2025, with projected rates by 2030 reaching approximately $9 (€8.42) for intra-European travel, $34 (€31.83) for medium-distance flights, and $56 (€52.42) for long-distance flights.

While proceeds are intended to be reinvested in green aviation initiatives and support for the elderly in Denmark, Jankovec argues that these funds should be directed toward the existing ambitious regulatory framework initiated by the EU through the Fit for 55 package.

The EU's framework aims to decarbonize the aviation sector by tightening the Emission Trading Scheme and mandating the deployment of Sustainable Aviation Fuels, requiring substantial investments of €820 billion by 2050. Jankovec contends that, instead of new taxes, the industry requires more financial support.

Contrary to these concerns, the Danish government anticipates the tax to generate 1.2 billion Danish krone (€160.89 million) in revenue. These funds are earmarked for their ambitious plan to use 100% sustainable fuels for domestic flights by 2030. However, Jankovec asserts that the tax not only risks economic connectivity but could impede recovery from COVID-19, as current air connectivity remains 10% below pre-pandemic levels.

In acknowledgment of the potential impact on smaller regional airports, Danish ministers have allocated 550 million Danish krone (€73.73 million) for targeted initiatives. This financial support aims to develop sustainable aviation fuel infrastructure and attract new international flights to these regional airports.

[With information sourced from Schengen Visa Info]