The EU Emissions Trading Scheme and the Malta Freeport

The EU Emissions Trading Scheme (EU ETS) has been in place for the past 20 years, since 2003. It deals with the reduction of greenhouse gas emissions through the use of market based instruments. Initially maritime emissions were excluded from its operation.

The debate at an EU level as to when greenhouse gas emissions from the maritime industry would no longer be excluded from this regulatory process has been ongoing for quite some time. Extending the applicability of the EU ETS to maritime transport was a crucial next step, no longer avoidable after the 2015 Paris Climate Summit.

At Paris there was unanimous agreement between the participating states that urgent action needed to be taken in order to contain the increase in global temperature to possibly no more than 1.5 degrees Celsius above the pre-industrial global temperature. Achieving that aim would be of considerable help in reducing climate change impacts, including the potential rise in sea level, a serious threat to islands and coastal areas.

As an island state with a substantially developed coast, Malta has an interest in arresting the projected sea level rise, the soonest possible. At least an interest in reducing it to the minimum possible. Depending on its extent, a sea level rise will be extremely damaging to Malta’s infrastructure.

Everybody is aware that as of the 1 January 2024 cargo and passenger ships having a gross tonnage of 5,000 tonnes or over started to be subject to the EU ETS scheme as a result of which they will pay for their carbon emissions. Initially such payments will cover 40 per cent of their emissions. This will rise to 70 per cent in 2025 and then to 100 per cent from 2026 onwards. This is an application of the polluter pays principle. A basic principle in international environmental law enshrined in the EU treaties and incorporated as well in the Maltese statute book.

The scheme will be operating within the European Union and consequently there will be shipping lines which will try to better organise themselves in order to avoid payment for their carbon emissions. This fact was highlighted some weeks ago by Alex Montebello, the CEO of the Freeport Terminal, who argued, in an article published in the local press, that the North African ports, to which the EU ETS does not apply, as they are not part of an EU member state, will be placed at a competitive advantage. Consequently, most probably, the Malta Freeport Terminal will lose substantially its transhipment role. The Malta Freeport’s loss, he argued, will be the gain of other ports along the southern Mediterranean shores, such as Damietta, Tangier Med or East Port Said.

Now this is an interesting argument which most probably was considered by the negotiators on behalf of the Maltese Government when they handled the matter in Brussels.

In fact, a substantial number of islands within the EU territory are exempted from the provisions of ETS if they satisfy the applicable criteria. Having a population which is less than 200,000 and no road or rail links with the European mainland are the criteria to be met. As a result, the port of Mġarr in Gozo is the only exempted Maltese port which is included in the relative EU implementation decision published in the Official Journal of the EU on the 19 December 2023.

No explanation has been forthcoming from Government, and I would not dare speculate as to the reason why the Maltese negotiators failed to ensure that the transhipment role of the Freeport Terminal at Marsaxlokk Bay was defended appropriately.  The locality of Birżebbuġa, possibly, stands to gain, inadvertently, as a result of this failure.

Obviously, Malta cannot possibly be exempted as this would defeat the whole purpose of the EU ETS which is that of reducing greenhouse gas emissions.

Possibly, for a change, as a country we have started taking our responsibilities seriously. Maybe we can now start the long process of aligning our economy with our environmental responsibilities.

Well, it is never too late.

Carmel Cacopardo
ADPD Deputy Chairperson
Published in The Malta Independent – Sunday 7 January 2024