EU ‘failed miserably’ in evaluating negative effects of shipping tax on Mediterranean countries – MMF

The Malta Maritime Forum (MMF) on Tuesday stressed that the European Union (EU) failed in taking note and evaluating the negative effects that the inclusion of shipping in the Emissions Trading Scheme (ETS) Directive will have on Mediterranean countries, including Malta.

The ETS is a key part of the EU’s strategy to address issues related to climate change, and has been described as a key tool in reducing greenhouse gas emissions. The directive obliges ships to surrender their EU allowances (EUAs) to compensate for the emissions they generate, thus leading to higher costs. For vessels with a tonnage exceeding 5,000 gross tonnage (GT) that have visited EU ports, annual emissions quotas will apply, with a pricing system set at €93 per EUA for every ton of CO2 emitted. This directive is being phased in this month (January).

The MMF, the entity which acts as the voice for Malta’s maritime industry, has voiced its disapproval at the way the directive was being introduced on countless occasions over the past few months, joining a number of other Mediterranean countries in their calls for a postponement in its implementation.

The directive’s introduction will have a significant impact on the countries’ attractiveness in terms of shipping. This is especially the case for Malta, given that it has become known as a transhipment hub over the years. Maritime industry insiders have publicly warned that the directive is leading a number of shipping lines to make alternative arrangements, potentially bypassing countries like Malta to avoid the costs from the ETS. Additionally, the implementation could lead to more emissions, as aside from potentially longer routes to North African ports as substitutes, European businesses will also need smaller ships to transport the goods from North Africa to European ports. The costs and delays incurred could also lead to businesses to move away from Europe, setting up elsewhere closer to the market.

The MMF stated that the calls were made “with the highest degree of respect” for the European institutions and their commendable objectives behind the directive. Despite this, it still affirmed that it “firmly believes that the EU failed miserably in properly appreciating and evaluating the negative effects that these regulations will have on Malta and other Mediterranean countries”.

It said that it has worked, and will continue do so, in order to avoid the negative repercussions posed, and in this respect it commended the efforts and support of the Maltese Government and the Opposition, “for recognising the threat to the national interest and treating it as such”.

“Going forward in fact, the MMF appeals for the country to continue to pull resources in the same direction and continue to make the necessary representations to the European authorities with a united front without politicising this matter as unfortunately, has been the case in recent days with mud-slinging exchanges made in the public domain,” it remarked, calling for a unified push towards the desired solutions.

The MMF stated that other countries are in the same situation as Malta, but are “not wasting their time on pointing fingers” and instead concentrating on solutions, something that Malta must do as well.

The maritime body stated that the regulations in the ETS shipping directive will go down in the EU’s history as the “fastest tracked regulations”, with member countries having limited time to “examine and understand the full implications resulting therefrom”. It added that the way the regulations were presented suggested that they were going to contribute to the fight against climate change, based on the principle of “polluter pays”, principles which the MMF feels “no one can vote against”.

“At the stage when these regulations were discussed, there was no information as to the alternatives being considered by the shipping lines to avoid paying the ETS,” the MMF continued.

“By the time that these plans became more apparent and by the time that the economic considerations were worked out by the shipping lines, the European Parliament had already voted in favour of these regulations. As the implementation date drew closer, the reality of the implications became apparent and no one can blame the shipping lines for working out contingency plans to avoid paying billions of euros by traversing the Mediterranean but avoiding calls at EU ports. This is where we stand at the moment,” it explained.

The MMF stated that in its representations to the relevant authorities, it proved on various occasions that the ETS on shipping “fails on all fronts”, not just in leading to ships to travelling longer distances.

New surcharges will be introduced by shipping lines, called ETS surcharges, which cargo owners are paying from the start of the year. The MMF remarked that the cost of the ETS will be “shifted to the European consumer”.

Additionally, the MMF highlighted that the regulations will not lead to economic growth within the EU, as the transhipment business consolidated over the past 40 years by European ports is “now being offered on a silver platter to non-EU ports”. It also stated that the aim of increasing growth and jobs will not be achieved as that loss of status as transhipment hubs will lead to jobs being lost, moving to other continents.

The MMF remarked that the directive also falls short in the objective of improving EU citizens’ living standards, with the risks posed by the regulations with regards to “increased inflation and the security of supply-chains”.

“With this state of affairs there is definitely no scope or time for petty political bickering, but there is the urgent need for a national effort to ensure that all risks associated with the poor implementation of these regulations do not damage the Maltese economy,” the MMF explained. While the entity said that it appreciates the “daunting political task” the Government faces, yet the country “must do whatever it takes” to ensure the direct maritime connections Malta depends on “remain in place for the benefit of our nation and its people”.