Germany has thrown a lighted match into the kerosene tax debate. Its plan to raise the subject at this week's Ecofin meeting could prove illuminating - or explosive.

The continuing tax exemption for jet fuel has long embittered competition between different forms of transport, and complicates EU efforts to lever traffic towards more environmentally-friendly modes.

Now, as the rich North agonises over the plight of the poor South, a jet fuel tax is being flagged as a new source of development funding.

At first sight, the approach seems perfect: simultaneously levelling the transport playing field, arresting global warming, and generating revenue for the developing world. And with the Kyoto Protocol coming into effect this week, and an informal Development Council underway in Luxembourg, the timing seems perfect too.

But how perfect is it?

Airlines, already faced with soaring fuel prices and higher security costs, fear client resistance to a further hike in fares. And unilateral EU action would leave European airlines at a competitive disadvantage on international routes.

Even a minimalist tax applied only on intra-EU flights will require unanimity among the member states - and the Irish and UK governments are already signalling reservations.

The European Commission is taking a...

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