EU states call on Brussels to rethink shipping emissions charge

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EU states call on Brussels to rethink shipping emissions charge

26 November 2023 Clean energy investing 0

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Major European shipping nations are resisting the EU’s plans to charge vessels entering their waters for emissions, saying the policy could divert maritime trade away from the bloc.

In a letter to the European Commission, seen by the Financial Times, ministers from seven EU countries including Spain and Italy have called for the option to pause plans to include shipping in the EU’s emissions trading scheme (ETS) from January. The letter said the move risks driving business away from European ports, while offering limited environmental benefit.

“The ETS regime that will enter into force in 2024 may induce emissions to other parts of the world and even increase the volume of [greenhouse gas] emissions through longer routes to avoid calls at EU ports,” said the ministers.

It could also have “serious impacts on our import and export sectors” and investments in ports, they said.

Under plans to tax shipping emissions within its limited jurisdiction, Brussels will soon require shipowners to buy credits for every tonne of CO₂ emissions they produce on journeys between two EU ports, as well as half of their emissions on shipments between an EU port and a non-EU port.

The rules will be introduced incrementally with all emissions covered by 2026.

Europe’s current price is about €80 a tonne. Lloyd’s List, the shipping news and analysis company, has estimated that if the EU carbon price remains between €80 to €90 per tonne of CO₂, total tax revenues from the coverage of shipping by the ETS could amount to more than €11bn annually.

The ship most likely to face the highest ETS bill was the cruise liner MSC Grandiosa, it said. It could face an €11mn annual bill in 2026.

Despite saying that they supported the overall aim of the policy, the ministers, who also included those of Greece, Portugal, Cyprus, Croatia and Malta, said that shipowners were likely to find “loopholes” and divert trade through non-EU ports along the Mediterranean coast such as Morocco’s Tanger Med or Egypt’s Port Said to avoid the additional cost.

Rules have been adopted by Brussels to prevent evasion through these two Mediterranean ports because they are less than 300 nautical miles from EU shores, but the ministers said this was “not sufficient”.

The ministers called on the commission to issue a public statement with a “commitment to address with concrete measures” risks to the EU’s ports associated with the introduction of the levy.

Environmental and trade experts have pushed back against ministers’ claims about the loss of trade.

Philip Damas, head of Drewry’s supply chain advisory, said there was a “possibility” that vessels could use non-EU ports to avoid taxes on their emissions, but the risk was “low” and would depend on the size of the overall economic gain, after the costs of any additional port stops were taken into account.

Tristan Smith, a shipping and energy researcher at University College London, said “carbon leakage” to countries outside the EU “can be real”. But he criticised calls for more non-EU ports to be included in the scheme besides Tanger Med and Port Said, pointing out that this would simply shift the risk further to different ports.

The commission said that there were measures within the legislation to avoid risk of evasion and that Brussels would “monitor closely the effects of this and if there is a need for adjustments we are ready to look at that”.

Additional reporting by Oliver Barnes in London