Labour MEP Cyrus Engerer has submitted questions to the European Commission about the economic risks to ports such as Malta in anticipation of an upcoming climate tax affecting shipping.

From January, cargo carriers will be obliged to offset their carbon emissions by buying ‘allowances’ when docking at EU ports, a requirement of the union’s Emissions Trading System (ETS) which is being extended to include the maritime sector.

However, with industry stakeholders estimating the move could cost shipping companies tens of millions of euros per year, many believe carriers will simply avoid ports like Malta altogether.

And while the European Commission (EC) has moved to include non-EU ports Tangier Med in Morocco and East Port Said in Egypt in the scheme, there are concerns this does not go far enough.

Labour MEP Cyrus Engerer

Calling the inclusion of the two ports a “step in the right direction”, Engerer asked the EC for its assessment of potential evasive practices affecting European ports and what it intends to do about them.

“How does the Commission plan to ensure competitiveness of European ports and prevent economic challenges, including potential job losses, for member states?” Engerer asked.

The Malta Freeport has warned of more expensive imports and higher export costs should shipping companies choose to avoid Malta and opt for neighbouring non-EU ports instead.

Engerer also asked the Commission how it intends to monitor the situation, assess whether other non-EU ports could be included in the scheme and take “prompt and effective action” to combat evasive practices.

Six week deadline to answer questions

Under its own rules, the EC has six weeks to respond to the MEP’s questions.

Describing the EU’s green efforts as a “historical effort,” Engerer told Times of Malta that although it had been the right to include shipping in ETS, the move could spell trouble for ports like the Malta Freeport.

“Including maritime in the EU ETS was the right move given this sector represents three to four per cent of the EU’s total carbon emissions,” he said.

“However, it is clear this inclusion has brought with it the risk of vessels avoiding Mediterranean ports to avoid additional costs stemming from the EU ETS, leading to a competitive disadvantage for these ports”, Engerer noted. 

“I am therefore calling on the Commission to monitor the situation closely, take concrete action against any evasive behaviour and to ensure that the competitiveness of European ports is safeguarded against any potential economic challenges and job losses resulting from these practices.”

Malta Freeport CEO Alex Montebello warned that should cargo vessels skip Malta this would “undoubtedly have a negative impact on local importers and exporters both in terms of connectivity and cost”.

His concerns have been echoed by the Malta Chamber of Commerce and the Malta Employers Association at a time when the country is grappling with unprecedented inflation.

There are also worries ETS will fail to tackle the problem it was drawn up to address – namely, carbon emissions in EU waters.

Detractors argue that should shipping companies opt for non-EU ports instead, they will nonetheless continue to pump out harmful emissions in EU waters while on route to ports where they would not be asked to pay the levy on emissions.

Should this happen, countries like Malta could lose out on commerce, competitiveness and access to goods and services while continuing to fall prey to the damaging environmental impacts of carbon emissions.