ESPO concerned over carbon and business leakage as EU ETS nears implementation

As the European Union (EU) prepares to implement the EU Emission Trading System (ETS) directive for the maritime sector, the European Sea Ports Organisation (ESPO) has raised concerns about the potential for carbon and business leakage due to the current legislation’s limited scope.

The EU ETS directive for the maritime sector aims to address emissions in the shipping industry by introducing carbon tax to cover their emissions and encourage more sustainable practices.

According to the directive, shipping companies must surrender their initial allowances by 30 September 2025 for emissions reported in 2024. To ensure accountability for emissions, the EU ETS directive introduces a phased approach to emission allowance coverage.

In 2025, shipping companies must cover 40% of their emissions reported for 2024 with emission allowances, and this threshold increases to 70% for emissions reported in 2025 in 2026. Starting from 2027 and onwards, companies must cover 100% of their reported emissions.

The directive also sets specific timelines for compliance, mandating that cargo and passenger ships of or above 5000 gross tonnage (GT) do so from 2024, while offshore ships of or above 5000 GT must comply from 2027.

To determine which non-EU neighbouring ports will fall under this scope of the directive, a ‘transshipment clause’ was introduced and the European Commission recently conducted a public consultation on the matter.

In its response to the consultation, ESPO expressed support for the emission trading scheme as a tool to promote sustainability in the shipping sector. However, the organisation voiced serious concerns about the initial signs of carbon and business leakage resulting from the directive’s narrow focus.

For ESPO, the principle to not consider as a “port of call”, in the counting of the ETS charges, the calls to some transhipment ports neighbouring the EU is only a partial solution to the problem. 

ESPO acknowledged the identification of major neighbouring transshipment ports, such as Tanger Med and East Port Said. Still, the organisation argued that this alone would not suffice to prevent evasion effectively.

While only a few neighbouring ports meet the high transshipment volume thresholds set by the legislation (65%), many ports and terminals across Europe have already developed or are expanding their transshipment capabilities. ESPO urged the European Commission to consider not only current volumes but also transshipment capacity in the various ports bordering the EU.

Under the current legislation, even if a call is made at a non-EU transshipment port, it is still economically advantageous for ships to prefer non-EU ports over EU transshipment ports. When a ship calls at an EU transshipment port, the emissions trading system (ETS) charges apply to 100% of the journey within the EU. In contrast, if a ship calls at a non-EU transshipment port, only 50% of the journey falls under the ETS charges.

“We see a real ramping up of investments in additional TEU (twenty-foot equivalent unit) capacity in ports and new terminals in neighbouring countries, including investments realized by major shipping lines in these ports, and we also hear about first rerouting movements outside Europe,” Zeno D’Agostino, Chairman of ESPO, said.

He underscored the importance of the EU ETS Directive’s goals while expressing regret that this legislative framework disadvantages EU ports compared to non-EU ports without delivering the expected environmental benefits.

To ensure the success of the maritime EU ETS, ESPO urged the European Commission to safeguard the competitiveness of European ports and prevent carbon and business leakage to neighbouring ports. ESPO called for continuous monitoring, beginning ahead of the directive’s application date, as rerouting and evasion movements which are reportedly already in preparation or underway.

Isabelle Ryckbost, ESPO Secretary General, stressed, “Once evasion is established, and trading routes have changed, it will be very difficult to reverse the negative developments.”

ESPO highlighted the potential loss of transshipment capacity, jobs, and oversight in Europe’s supply chain due to these adverse effects.

Given the seriousness of the situation and the potential consequences for European ports, ESPO called for an open, continuous, and constructive dialogue with the European Commission to identify adverse impacts and signal evasion at an early stage. The aim is to ensure that the EU ETS achieves its intended environmental objectives.