The Malta Independent 26 February 2024, Monday
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TMID Editorial: The hanging threat

Thursday, 30 November 2023, 11:24 Last update: about 4 months ago

Over the past weeks this media house has carried a number of stories about an environmental tax that is set to be introduced in the EU in 2024, and which will most likely have a negative impact on Malta.

The Maltese government has endorsed this tax, signing up for it.

We are talking about the European Union’s Emission Trading Scheme, which obliges ships to pay compensation for the carbon they generate while under sail. This scheme involves only those ports within the European Union.

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In simple terms, this means that shipping companies may use other ports in the Mediterranean, which do not fall within EU jurisdiction, to bypass this payment. This naturally means that ports in the EU, including our own Malta Freeport, will suffer the consequences.

In an interview with The Malta Independent on Sunday, the chief executive officer of the Malta Maritime Forum Kevin J.Borg said the “likely scenario” is that Malta will lose its role as a transhipment hub, as shipping companies will start using ports of call where this tax is not paid.

In the absence of a globally enforceable measure, ships that sail into EU ports will incur in higher expenses and those that manage to avoid EU ports will avoid the provisions and costs of the directive, he said.

Maritime law expert Ann Fenech was of the same view. If big shipping lines move their business to ports outside the EU because of this environmental tax, “it will be close to impossible” to bring them back, she said in comments published last Sunday.

Her disappointment is that the European Commission is biding its time with regard to the effect that such a tax will have on the industry and ports in the EU. In shipping, there is no such thing as wait and see. Decisions are taken quickly and, often, shipping companies see the bottom line. If they can save money, they will choose to do so.

This is the danger of regional laws – in the sense that matters are regulated one way for a set of countries, in this case nations that border the Mediterranean and form part of the EU, and are regulated in another way for other countries that have shores on the same sea but are not part of the EU.

As things stand now, the cost associated with stops in EU ports will be so great that shipping companies are likely to use alternative non-EU ports to tranship their containers in the Mediterranean.

The EU is being asked to reconsider its steps, and postpone the introduction of the new tax to allow for further discussions so as to create a level playing field. But, as of now, it is not taking any action in this regard.

The EU is playing for time, but in such circumstances a decision needs to be taken now. Shipping lines will see what is favourable to them, and if they decide to move their business away from EU ports – and North African states are gearing up to take over this kind of work – it will be hard to reverse the trend.

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