Phasing-out of excise tax exemption for bunker fuels. Quick scan of the impact on aviation and shipping

In this project, CE Delft was commissioned by the Ministry of Finance (Ministerie van Financiën) to conduct a quick scan of the effects of reducing fossil subsidies for shipping and aviation. This study examined two options for abolishing the tax exemption, one for fuels refuelled in the Netherlands and one an EU-wide abolition. The main conclusions are:

Maritime shipping:

• Ships will bunker fuel elsewhere in the world as much as possible (low excise revenues in the Netherlands).
• Transport flows will hardly change and effects on greenhouse gas reductions are small.

Inland and coastal shipping:

• A national abolition will involve bunker tourism (outside the Netherlands). Excise revenue will be around €185 million in 2030.
• If the phasing out of the exemption is carried out in a European context, excise tax revenues in the Netherlands will rise to €670 million in 2030.
• The increase in the cost of inland shipping will lead to a limited model shift to rail and road transport.

Fishing, floating equipment:

• For fishing, floating equipment and other non-commodity shipping-related shipping, higher costs reduce international competitiveness. This impact is more significant when introduced at the national level than when a European approach is adopted.

Aviation

• The impact depends largely on whether aviation demand exceeds or falls short of applicable capacity constraints.
• When demand exceeds available capacity, the number of flights remains constant. Excise taxes ensure that scarcity profits from airlines are skimmed off into the Dutch treasury. The effect on CO2 emissions is small.
• If the demand due to excise duty falls below the available capacity, the number of flights in the Netherlands and global CO2 emissions will fall.
• The revenue for the Dutch treasury will be around €450 million per year if only flights to European destinations are taxed, and between €1.4 billion and €1.8 billion per year if a tax is imposed for all destinations.