Germany on 1 May significantly raised aviation taxes in a bid to help close a financing gap in the 2024 federal budget. The government calls the move “climate friendly” and says the increased tax on departures from Germany — plus several other measures including abolishing subsidized agricultural diesel — will contribute “necessary” additional revenue.

But while the tax hike immediately affects airlines and is expected to impact airfares, it is seen by many industry stakeholders as a burden on the whole aerospace ecosystem and detrimental to Germany’s competitiveness.

Three major aviation trade groups have issued statements thus far: the German Aviation Association known as BDL, which advocates for airlines, airports, German air traffic control and other service providers; the Board of Airline Representatives in Germany (BARIG), which represents the interests of national and international airlines operating to and from Germany; and the International Air Transport Association (IATA), comprising global airlines. In addition to competitive concerns, they warn that the decision will reduce the ability for airlines to invest in decarbonization.

German taxes on flying increased on 1 May by 19% to between EUR 15.53 and EUR 70.83 per passenger, depending on the route, according to IATA. In a scathing rebuke, Willie Walsh, IATA’s director general, says: “When Germany’s economic performance is anemic at best, denting its competitiveness with more taxes on aviation is policy madness.

“The government should be prioritizing measures to improve Germany’s competitive position and encouraging trade and travel. Instead, they have gone for a short-term cash-grab which can only damage the economy’s long-term growth.”

BDL and BARIG suggest the tax is closer to 25%, and, like IATA, flag concerns that it will hinder economic growth and air traffic recovery. All three associations note that the plan fails to make good on a German government coalition agreement to use revenues from aviation taxes to directly fund production of sustainable aviation fuel (SAF), which is considered a cornerstone of aviation’s push to achieve Net Zero. Indeed, IATA reckons that SAF will constitute 65% of the industry’s Net Zero strategy.

“We demand that the federal government use the high billions in revenue from the aviation tax, as announced in the coalition agreement, to promote a competitively neutral market ramp-up for sustainable aviation fuels,” says BDL president Jost Lammers, noting that this approach would at least advance climate protection.

Without the promised ramp-up in SAF investment, says Michael Hoppe, chairman and executive director of BARIG, there will simply not be enough SAF in the foreseeable future to meet climate goals.

It is also believed that grants on this matter are likely to be reduced in the government’s forthcoming budget.

Beyond the aviation tax, IATA is concerned that the German government appears sympathetic to the European Taxation Directive which would add a tax on jet fuel, with Walsh characterizing regulators as appearing to have “an unhealthy obsession with aviation taxes”.

He says passengers don’t want to achieve decarbonization through taxation:

Our survey of air travelers in Germany shows deep skepticism about government claims for ‘green taxes’. 75% agreed with the statement “taxation is not the way to make aviation sustainable” and 72% agreed that “green taxes are just government greenwashing”.

Time and again, we see taxation that was supposed to help the industry decarbonize be stolen and then lost in the general budget. And money taken out of the industry means that it has less money to invest in other decarbonization measures.

Germany has enshrined Net Aero targets into law. However, reports published last year by government climate advisers and the German Environment Agency (UBA) suggest that Germany’s goal to cut greenhouse emissions by 65% by 2030 is likely to be missed, which in turn casts doubt on Germany’s ambitious longer-term ‘Net Zero by 2045’ target. The reports pointed especially to the building and transport sectors as failing to implement CO2-cutting measures prescribed by the German government.

Though Germany’s efforts to reduce CO2 emissions in aviation were not the central focus of these criticisms, there are other levers that can nonetheless be pulled in aviation — both on the ground, and in the air — to help turbo-charge Germany’s efforts to help meet its 2030 and 2045 targets.

In addition to significant SAF investment and advancements in electric and hydrogen power, there are opportunities to further enhance energy efficiency at airports and intermodal transportation; bolster the use of solar energy; expand the charging infrastructure for electric vehicles; and drive sustainability forward at major hubs.

To its credit, Germany has made notable gains thus far. And many would argue it is a green leader on the world stage. But the German government appears to see taxation as another lever to pull to be both ‘friendly’ to the environment and address a hole in the budget. Whether this is a winning strategy for environmental protection remains to be seen.

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Featured image of aircraft flying out of Munich Airport credited to Mary Kirby