Tax Measures to Promote Environmentally Friendly Passenger Air Transport: A Case Study on Incentivizing the Use of Sustainable Aviation Fuel

Abstract

The greenhouse effect is caused by the accumulation of heat-absorbing gases in the atmosphere, particularly carbon dioxide released from human activities including the burning of fossil fuels. Air transportation is a significant source of greenhouse gas emission. Although aviation emits less greenhouse gas than road transport, it still contributes approximately 10 million tons of carbon dioxide per year. And the emission expected to increase following the relaxation of COVID-19 restrictions. Thailand has committed to reduce its greenhouse gas emissions by 20% by 2030 under the Paris Agreement. Promoting the use of Sustainable Aviation Fuel (SAF) is therefore a key strategy, as SAF emits less carbon and is environmentally friendly. However, SAF is up to 2.5 times more expensive than conventional jet fuel, potentially increasing operational costs for airlines and transferring the burden to passengers. Although the Civil Aviation Authority of Thailand plans to mandate SAF blending requirements in 2026 and 2027, the lack of tax incentives may undermine airlines’ motivation, especially for domestic routes.Furthermore, international tourists increasingly prefer sustainable travel options. Thailand has also joined the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) program, which supports emissions reductions from international flights through the use of carbon credits.

Based on a study of tax measures implemented in the United States, Japan, and France, the author proposes improvements in both policy and legal frameworks. On the policy side, a clear national strategy should be adopted to support environmentally friendly air transport through taxation and address the limitations of granting tax incentives solely through the Board of Investment (BOI). Legally, the BOI's role should be revised to coordinate with tax authorities. Relevant regulations should be amended to align with the Investment Promotion Act B.E. 2520 (1977). Moreover, the excise tax structure for jet fuel should be revised, and a royal decree should be proposed to establish a tax credit mechanism for SAF. These measures should be linked to the sustainable aviation fuel value chain to accelerate the transition to SAF and help Thailand achieve its aviation sector emissions reduction targets effectively.