Portugal creates carbon taxes on air and sea travel

General framework

The carbon neutrality commitments already made by several countries, developed and developing, vary according to their definition of neutrality, the date to achieve net zero emissions and the legal force of the commitment to achieve the set objectives.

According to the Portuguese government – in the “Roadmap for carbon neutrality 2050” – carbon neutrality is economically and technologically feasible and is based on reducing emissions between 85% and 90% by 2050 and offsetting the remaining emissions by guaranteeing agricultural and forestry carbon sequestration capacity of about 13 million tonnes.

The trajectory foresees emissions reductions of between 45 and 55% by 2030 and between 65 and 75% by 2040.

In addition to other measures already implemented or still under discussion, Portugal recently introduced a set of “fees” for consumers traveling by air and sea, amounting to € 2 (approximately $ 2.30 ) per passenger.

This is not an entirely new solution in the context of international fiscal and environmental policies. For example, similar solutions are already in place in eight European countries: Austria, France, Germany, Italy, the Netherlands, Norway, Sweden and the United Kingdom.

In the broad sense, notwithstanding the fact that the law qualifies them as “royalties”, they are true “carbon taxes”, because the objective of the Portuguese legislator is to provide taxpayers (passengers) with compensation for emissions. polluting gases and other environmental externalities caused by these means of transport.

More precisely, these carbon taxes are based on an adaptation of the general “polluter-pays principle” to the “user-pays principle” (which calls on the user of a natural resource to bear the cost of depleting natural capital) .

Carbon tax on air travel

According to the guidelines of the relevant legislation (State finance law for 2021 and ordinance n ° 38/2021), the creation of a carbon tax on air transport is the most balanced solution. It enables air transport passengers to contribute to projects that make the economy more environmentally sustainable thanks to the action of the Environment Fund (a public structure which, in Portugal, has the function of implementation of sustainable policies linked to energy transition). At the same time, due to its reduced face value, the tax will have residual economic consequences for the sector.

In the preamble to Ordinance No. 38/2021, it is further added that “the tax on tickets has the advantage of being easily applicable and perceptible by users“.

This tax is levied on commercial air transport tickets for passengers departing from airports and aerodromes located on Portuguese territory.

This tax has a value of € 2 for each passenger and its value must be passed on throughout the commercial chain, up to the end customer (i.e. in cases where the ticket is not sold directly by the airline, the tax value must continue to be charged to the passenger by the company selling the ticket).

The carbon tax on sea travel

With regard to the tax on sea travel, Ordinance No. 38/2021 begins by justifying that “investments in the network of commercial ports have gone beyond the development of port infrastructure, differentiating Portugal and creating new value by asserting its ports as global logistics platforms. for large global operators and their transformation into hubs accelerating business and technology, efficient, intelligent and sustainable, leading innovation in green maritime transport “.

It is also stated that “in the cruise tourism segment in particular, as in other segments of economic activity in general, it is important that Portugal continues to focus on reducing greenhouse gas emissions. tight”.

In accordance with the Portuguese government’s position, the creation of a carbon tax, processed by the port authority in a simplified digital way via the single port invoice, is a balanced solution that allows cruise passengers, whether in transit, to embark or disembark, contribute to projects that make the economy more environmentally sustainable thanks to the Environment Fund.

The proceeds from this tax will be used to finance the activities of the competent port authorities in matters of safety and navigability and to carry out regular air quality measurement campaigns, as well as to compensate the municipalities where the waterways are located. terminals receiving passenger ships of the costs they incur for cleaning actions.

The owners of passenger ships or their legal representatives are subject to tax and the tax has a value of € 2 per passenger in transit, disembarkation or embarkation. As with the air travel tax, the value of the sea travel tax must be passed through the commercial chain, including to the ticket buyer.

How far can carbon taxes go?

The creation of this specific mode of carbon tax is not an isolated approach, but is part of a structural objective of most States to tax carbon consumption as part of the energy transition (towards low carbon sources such as green hydrogen or biomethane).

It will come as no surprise that similar new taxes are created in sectors still heavily dependent on non-renewable resources.

Therefore, in the years to come, careful multi-stakeholder scrutiny will be very relevant, especially in order to identify the problems or loopholes in the laws that create this type of tax.

Philippe de Vasconcelos Fernandes

Senior Consultant, Vieira de Almeida

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