Serious doubts remain as to whether ETS revisions are sufficient, Malta Maritime Forum says

The Malta Maritime Forum has taken note of the European Commission’s proposed revision of the EU Emissions Trading System (ETS), but said serious doubts remain as to whether the revisions are sufficient to ensure the long-term competitiveness of its ports and the wider maritime sector.

Among other things, the forum is calling for a derogation for island states on the basis of their insularity.

The ETS is the world’s first carbon market, launched in 2005, and remains one of the largest globally. It requires polluters to pay for their greenhouse gas (GHG) emissions, bringing overall EU emissions down while generating revenue to finance the clean transition. However, there have been issues raised with how it is carried out, including by representatives from Malta. The EU Commission recently presented its proposal for a revision.

Welcoming continued support for decarbonisation ambitions, the forum highlighted a number of specific points within the EU Commission’s revision proposal.

Within the published proposal, the Forum welcomed a targeted reduction in allowance-surrender obligations for certain container cargo transhipped through EU ports such as the Malta Freeport.  

It said that this relief would apply until 31st December 2035 to inbound voyages from non-EU ports performed by container ships with a capacity of at least 10,000 TEU (20’ containers), where the voyage exceeds 300 nautical miles.

The reduction would be calculated according to the share of containers unloaded at an EU port solely for transfer to another ship continuing to a non-EU destination, it said.

Although the measure would not apply to Malta’s own import and export cargo, it would help address the risk to Malta’s connectivity and the competitive disadvantage faced by EU transhipment hubs such as Malta Freeport when compared with nearby non-EU hubs that are not subject to the same treatment of EU ETS, the Forum said.

It said that the Malta Freeport has been particularly exposed to fierce competition from North African transhipment hubs which, since 2021, have invested heavily in infrastructure and technology to aggressively expand their capacity and business.

It said that in the past years, numerous services shifted their operations from EU to Non-EU transshipment hubs in Egypt and Morocco. As a result, North African ports have attracted the lion’s share of new transhipment business with an increase of 8 million TEUs as opposed the 0.5 million increase registered in EU ports, the forum said.

On another point, it said that as part of its review, the Commission is also proposing to strengthen the neighbouring container transhipment port rule. This refers to the EU's rule to identify ports that are mainly used for transhipping containers.

“The transhipment threshold would be lowered from 65 per cent to 50 per cent, while nearby non-EU ports within 150 nautical miles of an EU port could be captured on the basis of their infrastructure, even before they develop a high transhipment share. These changes are intended to reduce the risk of shipping activity being diverted through nearby non-EU hubs simply to minimise EU ETS costs," the Forum said.

The MMF continues to note, however, that the neighbouring port rule is rendered completely ineffective in the event that a vessel does not enter an EU port.

The Forum said that the EU must continue its process of reviewing the Directive in order to iron-out all remaining undesirable repercussions that emerge from its implementation, while preserving the environmental integrity of the EU ETS.

It said that in order to safeguard the connectivity of Europe’s most vulnerable regions, the Forum believes that all islands, large and small, outermost regions and island Member States must be granted a permanent and automatic derogation on the basis of their geographic disadvantage and insularity which is equally permanent.

Global IMO Measure

Moreover, the Forum is calling on the European Commission to provide clear declarations on withdrawing its ETS regime in the event of the adoption of an International Maritime Organisation (IMO) global measure, such as a rehashed version of Net Zero Fremework which is up for a vote later this year.  The Forum said the EU has committed itself to reviewing the ETS in such an eventuality, but the Forum would want the EU to declare that in such an event it would withdraw its own regime.

“Such clarity is required by the industry to provide an unequivocal message that any IMO measure will supersede regional arrangements, bringing all operators on the same level playing field without the risk of double payments.”

ETS Revenues

On the positive side, the proposal to earmark ETS revenues for the shipping sector, at EU and national level is welcomed, the Forum said.

It is calling on the European Commission to ensure that ETS revenues and the proposed Maritime Transport Decarbonisation Fund effectively support decarbonisation across all shipping segments including short-sea shipping and, tramp and bulk carriers.

“At a time when alternative fuels remain neither widely available nor commercially viable across all shipping segments, it was disappointing to note, in this regard, the limited support to wind and electricity, with no incentives planned for other technologies that improve energy efficiency and deliver timely emission savings.”

All in all, the Forum said it considers the proposed changes as positive steps forward in eliminating the business and carbon leakages that emerged from its implementation of this Directive.

The Forum expressed its appreciation towards government for its direct involvement in the subject matter and for all the authorities and dignitaries, both locally and in Brussels who met and listened to its arguments and positions whilst acknowledging that the process of consultation and review must continue.

The Maltese Government and the Malta Business Bureau had also issued statements about the revision.