New EU rules under discussion in the Council of Ministers in Brussels would, if adopted, impose excise duties on aviation fuel impacting up to 90% of exports of goods from Malta and up to 85% of imports, MEP candidate Peter Agius said.
“This is unacceptable as it sets Malta at a further competitive disadvantage when compared to mainland Europe. Maltese consumers would face even higher inflation due to increased transport costs while manufacturing jobs will come under more pressure from competition inside the EU itself as well as outside,” Agius said in a statement detailing the impact of the proposed EU Directive on Malta’s economy.
Agius explained how a proposed EU Directive on Energy Taxation plans to introduce new excise duties on the transport of goods by air. This is over and above the already mentioned price hikes on passenger flights. In a move to avoid setting EU air operators at a disadvantage with US counterparts, the draft Directive foresees exemptions for ‘all cargo’ flights but do not foresee such exemptions for ‘mixed’ flights where cargo is transported with passengers.
Agius cited Malta International Airport figures for 2022 showing how Malta has up to 90% of its goods for export and 85% of its imports transported through ‘mixed’ flights arrangements.
“Malta is expected to pay the highest price among EU member states with the proposed rules given that these include an exemption for ‘all cargo’ air movements but not for ‘mixed’ cargo and passenger aircraft,” he said. Virtually all goods imported and exported to and from Malta would be subject to excise duties on fuel starting from 2028. The situation is different in mainland Europe where the lion’s share of goods movements are done through ‘all cargo’ flights or through road transport. Malta will hence be disproportionately affected.’
“This calls for a differentiated approach on the negotiating table in the Council of Ministers. Islands like Malta need a systemic and permanent safeguard mechanism if the Green deal is to succeed. Fighting climate change is in all our interest, but it cannot come at a disproportionate cost for islands’ competitiveness, further compounding their insularity,” Agius said
Informal sources in Brussels indicate that ongoing negotiations in the Council of Ministers in Brussels see a majority of Member States set on pushing for new fuel taxation to reach the ‘fit for 55’ climate neutrality targets while Malta is arguing for a temporary derogation from the new directive.
Agius called on the Maltese Government to work for an alliance of islands. “A temporary derogation is not enough. We need a systemic and permanent mechanism that recognises the particular challenges of islands when it comes to road and air transport. EU rules to advance the fight against climate change should not lead to the perverse result of smaller island economies paying a double price when compared to other Member States. Malta needs to lead an alliance of islands with a firm stance for the protection of island economies. Insularity requires a considerate attention to particular needs. With the current approach, our insularity is set to be compounded rather than addressed.”
The new rules negotiated in Brussels are subject to unanimity in the Council of Ministers. The Maltese Government has not yet declared its position publicly on the ongoing negotiations. Agius calls on Government to use the leverage of its veto in Council together with support from other island economies to secure a systemic and permanent guarantee for the Union to include an insularity test in its ambitious green deal agenda.
“We can all appreciate the need to fight climate change. However this burden has to be carried proportionately and with due consideration to the existing challenges for islands in the European Union. 23,000 jobs in manufacture alone are on the line in Malta if we do not act to protect our manufacturing industry. We must be vigilant to protect these jobs by ensuring that Malta retains its competitive advantage in a highly competitive open market,” Agius said.