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Recent research featured in Climate Policy underscores significant energy injustices that arise from existing tax structures during the transition from fossil fuels to renewable energy sources.
The study, which is peer-reviewed, highlights that the cost of electricity used for essential needs, such as heating and lighting, is substantially higher—three times more—than that used for auxiliary purposes, like long-distance travel. This stark difference is predominantly attributed to prevailing taxation policies.
Furthermore, the findings bring attention to social disparities linked to fuel consumption within the European Union (EU). The wealthiest 1% of the population accounts for a staggering 66% of all air travel miles flown, while nearly half of EU citizens do not engage in air travel at all, with 90% flying infrequently, according to the research.
This 90% group contributes less than 0.1 ton of CO2 equivalent emissions per person annually, in stark contrast to the top 1%, who emit over 22 tons per year.
Dr. Jean-Baptiste Jarin, affiliated with the TREE laboratory (Energy and Environment Transitions) at the University of Pau and Pays de l’Adour, conducted this analysis using France as a case study, which is reflective of trends in other European countries. Although the research focuses on France’s application of EU regulations, the findings and methodologies have broader applicability to various nations and energy forms, including hydrogen.
To assess the implications of electricity taxation and its final pricing, Dr. Jarin gathered data on electricity consumption across three categories: primary needs (household), secondary needs (local mobility for electric vehicles), and tertiary needs (long-distance e-fuel mobility), followed by a comparative analysis of prices before and after tax deductions.
The study revealed:
- Electricity catering to household and local mobility needs costs 194 €/MWh, which is three times higher than e-fuel (synthetic sustainable aviation fuel) used in aviation, which is priced at 65.5 €/MWh.
- The taxation aspect contributed 120 €/MWh to the cost of household and local mobility fuel, while aviation tax accounted for only 11.2 €/MWh.
- Facilities producing aviation e-fuel are often minimally taxed, and jet fuel is exempt from taxation.
- Around-trip air travel from Paris to New York utilizing this low-carbon e-fuel demands approximately 7,300 kWh, surpassing the typical annual power needs (5,000 kWh) of an individual.
With the EU planning to mandate the use of e-fuels for aviation by 2030, and the UK enforcing a similar requirement even earlier in 2028, the implications of these policies are pressing.
Dr. Jarin, who has two decades of experience in the aviation sector prior to his academic career, advises policymakers to consider energy equity alongside any transformative strategies designed to reduce aviation emissions. He stresses that taxation rates should be proportionate to the energy’s intended use, which should serve as a fundamental principle of energy justice.
Dr. Jarin remarked: “As e-fuel technology and other electricity-based energy carriers are still developing, it is crucial for policymakers to anticipate potential social injustices when drafting e-fuel regulations. Basic energy needs benefit the entire population, but directing that same energy towards air mobility primarily advantages the affluent.” He advocates for policies that not only encourage production but also promote equitable consumption from a justice-oriented standpoint.
“The most concerning aspect of my findings is that low-carbon initiatives could exacerbate energy injustices across society,” he added. “A significant increase in e-fuel production, particularly for aviation, risks widening the gap between the wealthy and the rest of society. Hence, it is vital for lawmakers to be vigilant.”
“Many individuals may not yet grasp the notion that energy, particularly low-carbon electricity, comes at a cost. In the Global South and even within the EU, people faced exorbitant electricity bills during the winters of 2022 and 2023, leading to necessary reductions in heating and other electrical usage.”
While the study identifies key trends, it does come with some limitations; it is primarily focused on France, and the variable electricity prices across EU nations mean that the €/MWh results might differ somewhat. Additionally, carbon taxes and redistribution methods were not a primary focus of this research. Dr. Jarin highlights the contentious topic of where to impose taxes within the energy value chain.
“This is especially pertinent given the necessity for stable low-carbon electricity to synthesize e-fuel,” Dr. Jarin concluded. “The EU has considerable potential to not only produce e-fuels but also reduce its dependency on imports.”
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