Holidaymakers may face higher airfares as a new 'green tax' on imported fuels, announced by Chancellor John Healey, could be extended to cover jet fuel. Healey unveiled the proposed expansion of a Net Zero 'carbon charge' on refined oil products in a recent Budget, a move that also threatens to increase prices at the pump for drivers.
A consultation document released alongside the Budget acknowledged that the new levy, known as the 'carbon border adjustment mechanism' (CBAM), could increase prices for households. The document stated that CBAM "could affect prices paid by importers, distributors and end-users of CBAM goods – and in this case, for fuel products widely used throughout the economy, including supply chains and households."
Under current regulations, British refineries incur significant Net Zero expenses that their international competitors do not, allowing imported fuel to be sold at a lower cost. The proposed CBAM aims to create a more level playing field by subjecting imported fuel to some or all of the same Net Zero costs as domestically refined fuel.
The CBAM is set to apply to five sectors starting January 1 of next year: aluminium, cement, fertilizer, hydrogen, and iron and steel. However, the consultation proposes extending this mechanism to products such as petrol, diesel, and jet fuel. Given that the UK is a net importer of diesel and jet fuel, the cost of these fuels could rise substantially and be passed on to consumers.
Tim Alderslade, CEO of Airlines UK, expressed concern over the proposals, stating that the Budget has delivered "yet another blow to airline passengers." He noted that the move, coupled with existing high passenger taxes, could push up fares and further erode the UK's competitiveness as an aviation hub. Alderslade urged the government to reconsider the extension of costs on imported jet fuel, on which the UK is heavily reliant.