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EU countries are proposing major delays and exemptions to a fuel tax overhaul meant to push Europe toward a more climate-friendly future, wary of the growing discontent over environmental policies, according to documents seen by POLITICO.

The legislation, dubbed the Energy Taxation Directive, is meant to raise fossil fuel tax rates and drive people away from carbon-spewing energy sources — part of the EU’s attempt to hit its ambitious climate targets.

But a new draft of the bill, obtained by POLITICO, reveals that EU countries are now considering a seven-year grace period for countries to phase in the new tax rates, as well as exemptions for fishing boats and flights to and from island nations. 

The changes were made because of “legitimate concerns expressed by” capitals, according to a cover sheet on the new proposal, prepared by the Belgian Council presidency, which is overseeing negotiations among EU countries during its rotating stint atop the Council of the EU. 

The taxation revamp, first introduced in July 2021, is part of the EU’s broader push to slash 55 percent of carbon emissions by 2030. However, progress on the bill has been stalled for months, with officials privately confirming the prospect of higher fuel prices is a non-starter with European voters heading to the polls later this year.

Farmers and motorists have also taken to the streets in recent months across Europe, complaining about energy costs — making the idea of more fuel taxes even harder for policymakers to swallow. Airlines have also warned that tax rises could harm the sector as it recovers from the Covid-19 pandemic.

Against this backdrop, the new proposal offers significant delays in adopting the EU’s minimum fuel tax rates, given concerns the change would raise costs for those paying for household heating, filling their cars or booking flights. 

“Member States can achieve this ranking within a transitional period of seven years in order to provide a gradual introduction of the ranking,” the new draft reads.

New exemptions have also been granted in the draft for fishing, which the document points out is of major economic importance to coastal communities. 

The legislation notes member countries “should be allowed to apply a preferential treatment to the taxation of certain activities … important to the functioning and the security of the member state,” such as maritime patrols and military flights.

Another caveat would allow member countries to set a zero tax rate on civilian air travel to and from airports “located on islands with no road or rail link with the main continental landmass of the EU.” The measure, which would apply to member countries like Cyprus and Malta, would be in effect for the next 10 years, with an additional five-year transition period after that.

To climate activists, these compromises are simply loopholes that undermine the point of updating the EU’s energy tax rates to match its climate ambitions.

“One of the biggest challenges with the revision of the Energy Taxation Directive was to get rid of the unfair tax privileges that some sectors benefited from,” said Jo Dardenne, an expert on aviation at the Transport & Environment green campaign group. “But every new compromise is coming with a set of new exemptions. There are significant loopholes in the text which mean that most of the aviation fuel remains untaxed.”

Even the most polluting parts of the sector aren’t facing the full force of the environmental reforms, Dardenne argued. While private jet owners and those chartering aircraft would have to pay tax on their fuel under the rules, they are expected to pay the same amount of tax that the average motorist pays when filling up at the pump. 

“That seems unfair given private jet flyers’ disproportionate climate impact and wealth,” she added.

A spokesperson for the European Commission, which initially proposed the bill, told POLITICO that “we don’t comment on ongoing negotiations,” but said the EU executive will “encourage” EU countries to “reach a compromise that safeguards the ambition of the proposal.”

The spokesperson defended the Commission’s effort, arguing it “supports our priority objectives to reduce consumption of polluting energy sources and to promote greener fuels and energy efficiency.”

This isn’t the first energy tax reform effort to come up against political opposition. 

In 2015, the Commission was forced to back down on a proposed revision to bloc-wide rules after EU capitals failed to reach an agreement over four years of talks.

And even if the Belgian Council presidency is able to find a middle ground acceptable to national governments, the European Parliament won’t move on the legislation before the EU election — leaving the Energy Taxation Directive as a post-election hangover for the next Commission.