France’s Controversial New Aviation Eco-Tax

Filed Under: Air France/KLM

Environmentalism is becoming a much bigger issue globally, and that’s a good thing. However, the question of how governments should tax in order to encourage certain behavior is a much more controversial topic. The latest such case involves what France’s government has just announced.

France to introduce airline eco-tax

France’s transport minister, Elisabeth Borne, has today announced that France plans to introduce a new eco-tax on airlines flying out of France.

The plan is that this will be implemented in 2020, and will raise around 180 million Euros annually, which is intended to fund transport in France. In other words, the government will take money from the airline industry to fund (potentially competing) forms of transportation.

The tax is to be introduced gradually, and will amount to about 1.50EUR for an economy ticket and 9EUR for a business class ticket within the EU, and up to 18EUR for a business class ticket for flights out of the EU. So that’s not insignificant, though also pales in comparison to the UK’s Air Passenger Duty, for example.

The tax will only apply for trips that originate in France, so this wouldn’t apply to transit passengers who are simply connecting at a French airport.

Air France would be hurt most by this new policy

Airlines are opposed to this tax

As usual, airlines are mostly opposed to this new tax. That’s understandable, since airlines display “all-in” pricing, and the demand for travel is pretty elastic. Any tax increase will likely lead to airlines being able to charge less otherwise. It’s not like they can just add the tax to the fares they charge now without seeing demand shift.

Air France would most negatively be impacted by this policy, and they strongly disapprove of this new tax. They say it would hurt their competitiveness at a time when they want to invest in their products to be able to improve their environmental footprint as part of a fleet renewal.

France is one of the most heavily taxed air transport industries in Europe, and Air France’s activity contributes 1.1% of French national GDP, and generates more than 350,000 jobs.

This new tax would represent an additional cost of over 60 million Euros per year for the Air France Group. The airline also points out that they already lost over 180 million Euros last year on domestic flights, and this would make their position even weaker.

Could this cause Air France to cut domestic flights altogether?

My take

I’m really conflicted on these types of government policies. There’s no doubt that higher aviation taxes reduces demand for air travel, though nowadays that sort of seems to be the goal for many government, even if it reduces employment in the industry.

I guess part of the issue is that I don’t think the logic of how these taxes are implemented is sound. It seems like the government’s goal is to just get people to stop traveling by air, though that seems unrealistic. It would make sense to take other approaches as well:

  • Shouldn’t governments be creating tax incentives for airlines to operate fuel efficient aircraft (or maybe tax penalties for operating fuel inefficient aircraft)? For example, the per passenger fuel burn on a CRJ200 is nearly twice as high as on an A220.
  • I understand the concept of wanting to tax those originating in France rather than those connecting, though from the government’s perspective shouldn’t it be the other way around? They presumably want people to visit France and the tourist dollars that come along with it, while they should discourage people from just flying through there, which has a negative impact on the environment and little benefit to the country otherwise.

Personally I think the focus should be on encouraging airlines to reduce per passenger emissions as much as possible, rather than just encouraging people not to fly altogether, at least on long haul flights where other forms of transport aren’t practical.

Airlines are investing in new planes not just because they’re good for the environment, but also because what’s good for the environment is usually good for their bottom line. The worse Air France’s financial situation, the less they’ll be able to invest like that.

So I think it’s perfectly fair for the government to encourage emissions to be reduced, but this kind of tax largely seems counterproductive, especially given that Air France historically hasn’t been the most financially healthy airline out there.

Do you support this new French aviation tax? What’s the ideal way for governments to encourage a reduction in airline emissions?

Comments
  1. France has a very good history of investing in high speed rail, so I trust they will continue to do so with the new funds. Pushing people from high-carbon travel to lwoer carbon travel is extremely important.

    But I agree that a flat fee doesnt make sense. Should take into account the distance, and as you said, fuel efficiency. Make it pricier to fly on a 30 year old plane thats less efficient, and push more people to planes within Europe. You cant really take a train between Paris and Martinique but maybe flights between Paris and Betlin should be eliminated.

  2. Ben, you are overthinking this. The goal of the French government is to find more “revenue” and they’ve identified air travel as a potential additional revenue source. It’s all about obtaining more money to spend; that “eco” stuff is merely window dressing designed to spin this as something that will somehow contribute to “saving the world”. Reality is that it will do nothing of the sort. This is marketing at work. And the money collected will just be spent.

  3. IF the government uses the money to increase train connectivity in France in the outlying regions (eg those without TGV connection) then I am highly supportive. If you travel from Lille to Marseille by train, this will take you 4.5 hrs whereas Lille to Straßburg is 2.5 hrs – fantastic and much faster / pleasurable than by plane. Flying ought to be mainly for the trans/intercontinental routes but not for short European hops.

  4. @ Stogieguy7 — Hah, all fair enough, though given the trend we’re seeing towards environmental taxes related to aviation, I figured it was worth looking at this more big-picture.

  5. The Netherlands also recently proposed a tax that would also exempt connecting flights. I honestly feel like both countries are trying to unfairly benefit KLM / Air France, which operate a large number of connecting flights, at the expense of Easyjet and Ryanair, which solely operate on a point-to-point model.

    A better aviation tax would encourage the use of more fuel efficient planes as you mention and would penalize connecting flights. This of course would benefit Ryainair / Easyjet immensely because their fleet is so young and fuel efficient, and wouldn’t be much fun for KLM / Air France with their aging fleet.

  6. Lucky, I think part of the goal is to reduce the amount of aviation because even “fuel efficient” aircraft have a massive carbon impact. So really the only way to reduce that is less flying — incentivizing fuel efficient won’t meet their carbon goals.

    Also the idea of taking connecting passengers makes no sense: Most passengers don’t care what connecting airport they go through, so if there’s an additional tax on connections in Paris, everyone will be routed through KLM/Amsterdam or another city that’s cheaper. Lots of flights to Paris will be cancelled because it won’t be an efficient hub for connections if other nearby cities have lower taxes. The environmental impact from connecting flights isn’t localized to France — carbon emissions anywhere in the world contribute to global warming for everyone — so pushing connections out of the country would just mean France loses all that revenue from landing fees, passengers buyinf things in the airport on their connection, etc. It would really destroy the Air France side too, a source of national pride. They’re presumably thinking people who originate in France can’t easily avoid the fee so they’re more likely to have to just pay (even though it will have some effect on demand, as you note).

  7. Makes sense. It won’t put AF at a disadvantage as passengers flying into / out of France will need to pay it irrespective of the airline and it doesn’t apply to AFs transit passengers.

  8. Actually just did a study for a major aerospace company on the impact of Sweden’s recent “environmental tax” on passenger traffic.

    Much like the French version, the Swedes’ tax applied only to departing passengers, and was much higher across the board. In our study, we attributed 1% of the overall YoY traffic decline in Sweden to sustainability concerns and the related tax, with domestic sector taking a greater hit than international. Although people are much more sustainability conscious in the Scandinavia

    I do have to disagree with you on the application of the tax on transit passengers. If such tax was applied to passengers in transit, it would have a much greater negative impact on airlines, as it will make them much less competitive globally, potentially losing traffic to carriers based in other hub countries. Whereas if only applied to origin traffic, it’ll be uniformly applicable to all carriers flying that O&D, which means that no one will be at a disadvantage, but no one wins

  9. @ John — Regarding the first part of your point, that’s fair, but then why stop there? Why not make the tax so high that it will actually impact demand by a double digit percentage overnight?

    Regarding your second point, you’re absolutely correct from a global perspective, though on some level this does seem localized to France. In other words, France is using the money to build up French transportation infrastructure.

    I’m not saying they shouldn’t do anything otherwise, but this kind of a tax will lead to a truly negligible decrease in demand globally, when in other parts of the world the demand for air travel is skyrocketing.

    If the goal is to reduce emissions and they’re serious about it, shouldn’t they greatly increase the cost of planes, or add some tax to the sale of them? After all, airlines can’t operate flights without planes, and Boeing alone couldn’t keep up with the global demand for aircraft.

    I get all of your points, all I’m saying is that I don’t actually think any sort of eco-tax, as implemented, serves a useful purpose.

  10. if it’s fuel efficiency based, who becomes the arbiter ? if the law ends up saying A32xneo is considered “fuel efficient” but 737max isn’t, would that lead to accusations of favoritism and WTO complaints ? The A330, even the ceo, have come an insanely long way since the early 90s, so how do you delineate the markers for such a plane with lots of PIPs along the way ?

    blah blah blah remind us how much the UK APD king’s ransom has actually deterred travel to and from London ? France can afford this cuz, honestly, no one believes BRU or LUX are realistic alternatives to CDG/ORY given the time and distance involved, even with Thalys (in the BRU case). I, for one, fully support France on this matter.

  11. Great news for European flyers. Lisbon and Madrid remain open for departures even as London and Paris are heavily fogged in with high taxes. Can’t say as LHR and CDG were ever my favorite airports as some parts of LHR and CDG make third world terminals look absolutely beautiful by comparison.

  12. Hahahaha, this has zero to do with the environment. The French governement sees an easy way to pocket more money. Period.
    Pimping travelers is easy.

  13. France already has Taxe de solidarité sur les billets d’avion, aka Chirac Tax which goes to Unitaid. This is nothing new as many municipalities are also trying to cash in on tourist by introducing city taxes etc. on hotel accommodations. Note that newly proposed tax will go to improvements of public transportation within France rather than on decreasing CO2 emission from international air travel. How about decreasing congestion at airports so planes would not stray idle for 30 min before take off?
    Note that every time you put a new highway or railroad, you emit enormous amount of CO2 from all that new asphalt/concrete/steel. More importantly, you permanently cut trees and vegetation over the transportation corridor and disrupt natural habitats for a few species remaining on this planet

  14. “Why not make the tax so high that it will actually impact demand by a double digit percentage overnight?”

    You must be new to politics.

    Lawmakers need to balance their goals with not getting fired.

  15. France, and Europe for that matter, has a great transportation network. In that respect, aviation is not the only alternative as it may be in other countries. It doesn’t see aviation as a separate entity from its transportation capabilities, so I don’t find this surprising nor a problem.

    At least no more than having to pay redundant 9/11 Security Tax and TSA Funding Taxes on tickets within the US.

  16. It’s a way they are taxing foreigners to make us build their own highways, which we will never use.

    Domestic flights are almost non-existent in Europe, 95% of AF’s passengers are flying international, and more than 60% of them are not French.

    Its nothing about environmental care.

  17. Wouldn’t taxing av fuel be more accurate?

    Carbon emissions are directly related to the burning of fuel. This would incentivize the airlines to use more fuel efficient engines, and more accurately capture the negative externalities of carbon emissions.

  18. Flying is one of the most polluting things that we can do – and there is a social and environmental cost to this pollution (in the form of climate impacts) that is currently not being paid for. Flying needs to reflect these negative externalities. So yes, this tax is a good step – and especially that those at the pointy end, who take up more space, pay more than those in the back.

    More efficient planes are all well and good, and are improving all the time (and maybe even electric!) – but right now, these efficiencies are being outstripped by absolute increases in carbon emissions from aviation. This will hopefully be beginning to change over the next decade (look up CORSIA), but the basic math is that the more we fly, the more that other sectors of the economy have to make steeper, more expensive emission reductions.

  19. This is the problem with “liberal environmentalism”. The burden of paying for the environment is always passed down to the consumer to discourage them from flying, instead of the corporations who directly perpetrate environmental damage. Why not structure the taxes in a way that encourages airlines to use fewer, larger aircraft? It would be far more effective at reducing the negative environmental impact of flying, (especially if it encourages a new generation of efficient environmentally friendly VLAs and large narrowbody’s) and have a less significant increase in the cost to the consumer.

  20. I’m very supportive of doing more to combat climate change, but taxing aviation is the wrong way to go about it. Aviation accounts for just 2-3% of overall carbon emissions, and only about 12% of what’s produced by transport. Aviation has also gotten much more efficient on a passenger-mile basis. Changing our electricity production to more renewable sources will have a much bigger impact, and that can be done while creating jobs. (I have no financial stake in any of this, beyond broadly invested index funds.)

  21. Leftist governments all over the world are using global warming as an excuse to redistribute wealth via carbon taxes that raise tons of money but actually do very little to help the environment because people still need to fly, drive, take delivery of food etc. Maybe there aren’t enough smokers left so governments have had to invent new sin taxes to take up the slack. If what I’m saying isn’t true, then why aren’t these same government rationing fuel like they did in WWII, rather than taxing it more? That would hugely reduce emissions, but the $$$$ wouldn’t be there. “Follow the money and you’ll find your killer.”

  22. This is just an excuse to get more tax money for the French government. If they really want to reduce carbon footprint, then they should tax the private jets first. But no, the rich has bought the politicians, so that would never happen! They will, for the most part, only tax the middle, working class people!

  23. @ John. It states transfer passengers are exempt. Why are many contributors referring to transfer passengers being penalised. They won’t as it only applies to journeys commencing in France eg London Paris London.

  24. According to the most recent study I read, commercial flying accounts for about 2.5% of global carbon emissions today. The fact that emissions and fuel economy (and thus cost) are inextricably correlated means that aviation has been and will continue to be one of the industries most aggressively invested in emissions reductions out there. And this will ultimately serve to reduce that investment. It seems dumb to punish an industry that actually is doing it right.

  25. @Ben – You should do a OMAAT contest like FM is doing. It’s an amazing way to illustrate the value of miles and points. If the idea of flying coach makes you shudder, you could do one for business class.

  26. If the French government were serious about climate change they would immediately ban all intra-France flying. Everyone is forced onto the train and the environment is saved!

    They should probably tell Airbus to stop test flights because we all know that’s not environmentally friendly, right?

    And…you can re-employ the AF castoffs at the rail companies. What’s the difference if they work for one bloated bureaucracy or the other.

  27. The exemption on transfer passengers is due to international treaties on aviation, limiting what can be charged as a ‘departure tax’

    This is a bit weak as far a an environmental tax goes, but it will have some impact at the margin. As others have said a tax on jet fuel, fully valuing the externalities of flying would be much more effective as it would incentivise more efficient aircraft and also fairly distribute the burden between originating and transfer passengers (and freight for that matter).

    I know lots of people have said flying only constitutes 2.5% of global emissions but the world needs to be a net zero by the end of the century, if not by 2050, if we are to avoid more that 2C of global heating. So every sector has to do heavy lifting to get us out of the climate crisis.

  28. God everyone is a tree hugger now. Glad I’m an old retired rich guy and don’t have to deal with this junk for long.

  29. The French Government has an agenda to impose a “carbon tax” or equivalent penalty on transportation. They tried to impose it on gasoline and diesel fuel when they were first elected. The general population revolted as is their wont and riots forced the government to eliminate the tax.

    Incidentally carbon taxes have been proven not to work. Experience in BC has shown that after 5 years the use of fuel has actually increased dramatically.

    So having failed to implement a massive tax hike on fuel for ground transport and wishing to save some face they have decided that “the rich” who fly airplanes are unlikely to riot no matter how high the tax. So now they have gone after a “soft target”.

    Of course it will not work. As Lucky suggests it will backfire and reduce the ability of Air France to renew their fleet with fuel and carbon efficient aircraft and will create huge problems in the Air France travel industry.

    But face will be saved, they can claim they are working towards the goals of the Paris Accord which only includes the most carbon efficient countries, not the real polluters. But face will be saved and that’s all that matters in today’s world.

  30. Would this apply on award tickets?

    What is the eco tax for first class tickets?

    What is the eco tax for premium economy tickets?

    What about upgraded tickets? If someone pays for economy, but upgrades to business or business to first? Which of the cabin class should the tax be applied to?

  31. I doubt a max €18 tax will impact tourism significantly. France is just one of those iconic, go-to places for most tourists.

  32. I do agree the €18 business class tax. Business class passengers, despite providing a better return for airlines, should be aware of the fact that their seats could otherwise allow 3 more pax to fly.

    But the application of the tax make it useless. You either make it EU-wide, or nothing. Only flights originated from France is nearly nothing.

  33. It’s a bit rich for a website that encourages binge flying to squirm at the cost this might have on those free tickets you want to earn. Mileage runs and pointless flying to achieve threshold tiers on ffps is about as victimless as driving around in your car more to earn more miles when you fill up the tank.
    And the hand-wringing about whether the tax applies to flights using miles! No, you shouldn’t have to pay a tax for your self-congratulatory flying because you’ve really earned it tearing around the skies emitting rose petals.
    I’m a very frequent flyer and I also work in the industry, but the whole industry is in denial about what the impact is on our environment – and KLM seems to agree.

  34. ECO TAX a bunch of crap..most of these nonsense climate control fees do not go to the Environment anyway!! THey just want more socialist tax revenue!!!

  35. @Charlie @dot totally agree…in the near future after years of collecting carbon taxes the world will realize that $ was not used to reduce carbon output. Imagine that, a government sin tax used for its own sin of greed and wealth redistribution. I grew up working class and never feel as though the rich owe me anything. I must make my own way despite government schemes to take more of my $ cloaked in murky self righteous plots to fix earth…please! As if $ alone could fix such a thing.

  36. “I guess part of the issue is that I don’t think the logic of how these taxes are implemented is sound.” AGREED!

    At the beginning of your post, you mention taxation as a tool to change peoples’ behavior. In spite of what the government may argue, this tax is not that. Airline traffic will not decrease in favor of the train. In fact, if it did, that would not be a good thing. This tax is designed to generate ongoing revenue to fund railroad infrastructure maintenance. The description “eco-tax” is a misnomer. In fact, I would call it a lie.

    As Senator Long of Louisiana once said, “Don’t tax you. Don’t tax me. Tax the guy behind the tree.” In this situation, one could say, “Don’t tax the railroad. Don’t tax the people who use the train. Tax the guy who takes the plane.”

  37. It’s just 18 EUR. Save on that one night out to the bar and you should be fine. People tend to forget that flying is still a privilege. Countries get to increase revenue from tourists – some countries have tourist taxes. This is one means of ensuring that foreigners that use the transportation system within the country are paying their fair share.

  38. Wow… so many individuals flustered about taxes. I don’t understand why Americans have such a strong hatred towards taxation. It’s probably because their government uses the majority of it to fund wars and military expenditures, instead of basic necessities: healthcare, education, infrastructure, living wages, social care. Maybe the taxes aren’t the problem, but the way the government uses the taxes, unchallenged?

  39. While I love your articles in general, your analysis rarely makes sense.

    “I don’t think the logic of how these taxes are implemented is sound. It seems like the government’s goal is to just get people to stop traveling by air, though that seems unrealistic.”

    You just said this would put people off flying, so how is it unrealistic? Flying within Europe is incredibly cheap, many domestic flights etc could be easily replaced by bus or train – the more expensive you make flying in comparison, the less people will choose it over the train.

    It’s also a rather basic principle where the people who cause the damage pay to compensate the other people affected by it.

    Finally, incentivising efficient aircraft isn’t really necessary because airlines already have a huge incentive to go for them. Not to mention, if all airlines got new planes and dumped a load of old ones for scrap, that wouldn’t exactly be great for the environment anyway. Saying that, I would like to see a fuel tax.

  40. Who are they kidding, really? They are actually punishing tourists/visitors from far-off countries seeing as they ridiculously have double fees for non-EU departures. How can Asian tourists, for example, help flying out of France if they only have budget for a trip in that country? This initiative is short-sighted, really.

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