ESPO: Maritime EU ETS should not allow carbon and business leakage

The European Sea Ports Organisation (ESPO), a representative body of the EU port authorities, has welcomed the proposal to include shipping in an Emission Trading System (ETS).

Putting a price tag on shipping emissions through the EU ETS should deliver clear climate gains and push the sector to choose greener solutions. However, the effectiveness of this policy will be undermined if evasion of a regional ETS is possible through rerouting of business, the organization said.

Given the international character of shipping, a global market-based measure would be, by far, the most suitable option. Such a global measure would be more difficult to evade, and would entail lower risks for negative competitiveness effects compared to a regional measure.

“ESPO therefore asks the European Union to increase the pressure on the International Maritime Organization (IMO) to make progress on the development of such a global market-based measure. An alignment between the EU ETS and a market-based measure on the international level should then follow,” according to ESPO.

The commission proposal for a European maritime ETS covers the emissions from intra-EU voyages and emissions at berth, alongside half of the emissions from extra-EU voyages (both incoming and outgoing voyages).

Due to the limited scope of the current ETS proposal, ships can find ways to avoid falling in the scope of the EU ETS, by rerouting and calling, where possible, at non-EU neighbouring ports in order to minimise costs.

“Evasive port calls at neighbouring non-EU ports could seriously jeopardise the effectiveness of the maritime ETS, as it would not reduce total shipping emissions. It could even increase overall emissions, in particular when evasion leads to longer voyages,” ESPO added.

At the same time, evasive calls would divert traffic and business from European ports and seriously impact the business of certain important European ports which are already in fierce competition with other ports in countries neighbouring the EU.

This risk exists for ports in the EU located in the North Sea, the Baltic Sea, the Mediterranean Sea and the Black Sea. Many of the affected ports are important nodes in the EU logistic chains, and play a crucial role in their regional economies.

Instead of measuring the damage once it is already done, ESPO asks first for a full impact assessment of the implications of the current geographical scope of the proposal on carbon and business leakage, along with the accumulated impact of all Fit for 55-proposals. ESPO said it is happy to share evidence of the impact with EU policymakers in order to find an appropriate solution.

“European ports are supportive of an emission trading scheme and see pricing as an excellent instrument to boost greener behaviour. However, the commission proposal contains too many loopholes that risk to seriously harm Europe’s ports business without any gains in emission reduction from maritime, on the contrary,” Isabelle Ryckbost, ESPO Secretary General, commented.

“Ships can move, ports cannot. The polluter will not pay, but move out where possible, without any emission gains. We cannot just wait and monitor the damage that would result from the current proposal. Decisive action must be taken by the Commission, Parliament and Council to prevent the risk of evasive port calls and delocalisation of port activities outside the EU and the negative impact on Europe’s connectivity.”

A possible solution – if legally possible – could be to expand the scope of the proposal by considering the evasive call to/from a non-EU neighbouring port as a call to an EU port in the counting of the ETS emissions. In addition, the proposed monitoring mechanism should be strengthened to clearly define evasive trends, and foresee next steps if such trends are identified.

ESPO also asks to reinvest any revenues generated through an ETS mechanism in the European maritime sector. It is a matter of principle that revenues generated through a market-based measure should be used for the purpose they pursue, in this case the transition of the maritime sector to net-zero emissions.

Specifically, revenues should be used to facilitate the deployment and use of sustainable alternative fuels, including the electrification of vessels and designated infrastructure in ports. The use of carbon contracts for difference should be limited to supporting innovative pilot projects and port infrastructure.