Costs of new EU tax on shipping vessels will be paid by consumers – trailer operators’ chairman

The chairman of the Association of Tractors and Trailer Operators (ATTO) has said that the extra costs the new European Union tax on shipping vessels will bring about will be passed on to the consumer, meaning that imported products will become more expensive.

The EU ETS Directive on Shipping obliges ships to surrender so-called EUAs (Emission Unit Allowances) to compensate for the carbon they generate while under sail.

In spite of calls for the postponement of the implementation of the new tax, which has been described as being discriminatory against Mediterranean ports which are European member states as against others which are not, the ETS directive came into force on 1 January.

The Maltese government was a signatory to the directive, with the Nationalist Party accusing the government of being an accomplice in a rise in inflation that will put more pressure on vulnerable people. In reply, the Labour Party said the directive was endorsed by PN MEP Roberta Metsola, president of the European Parliament, who described it as “historic and crucial”.

Contacted by The Malta Independent on Sunday, ATTO chairman Joseph Bugeja

Joe Bugeja, chairman of the Association of Tractors and Trailer Operators (ATTO)

said the association’s members will “unfortunately” have to adjust their tariffs accordingly, depending on the extra costs they will be incurring.

Currently ATTO members cater for around 1,300 trailers per week with products to and from Malta.

Given Malta’s dependence on sea connections, Bugeja said that it is impossible for trailer operators not to make use of vessels as it is the only way to and from the island. Shipping companies will be passing on the costs of the ETS tax on to trailer operators and, in turn, the operators have no other option but to raise their rates for transporting the products. This will inevitably lead to importers passing on the additional expenses by raising the prices of the products they are trying to sell.

According to the new regulations, ships with cargo capacities exceeding a specific threshold, starting this month, have been required to “purchase” emission allowances for 40% of their carbon emissions, which percentage is set to increase to 100% by the year 2027.

The taxing system, which is already in place for the aviation sector, forming part of a wider package, is known as Fit for 55. This is a European initiative which targets a reduction of EU greenhouse emissions by 55% by end of 2030.

In comments given to this newspaper last November, before the new tariff was introduced, Malta Martime Forum CEO Kevin J. Borg said that the “likely scenario” is that Malta will lose its role as a transhipment hub, as shipping countries would choose ports of call outside the EU where no such tax is paid.

“The cost differential between EU and non-EU ports could stand at €34m per year per each route served. This has been confirmed by major carriers while also reaffirming that such is the tight competitive scenario that a decision by any single carrier to incur the extra EUA cost could have existential consequences on the company as against others which decide to by-pass the directive. Clearly, this variance is prohibitive enough to force major shipping lines to seek alternative solutions,” Borg had said.

In a seperate interview, maritime law expert Ann Fenech had also told The Malta Independent on Sunday that if big shipping lines move to non-EU ports as a result of this tax “it will be close to impossible” to bring them back.

In shipping, time is money, and if shipping lines “are tempted to go to Tangier Med or Damietta”, which are non-EU ports, this will have “very serious detrimental effect on the maritime resources of south peripheral European states such as Malta”, Fenech had said.

Asked about how much the association is expecting its members to increase their tariffs, Bugeja said he could not provide an estimate as he said that each operator will be accordingly adjusting their own.

Given that the new directive has just come into effect at the start of the new year, Bugeja said it is too early to say what will be the long-term effects of the tax. So far, no major shipping companies have chosen to re-route their vessels away from Malta.

Bugeja said that Maltese trailer operators have invested “millions of euros” to provide their services, with some of them having hubs in Europe to facilitate their operations.

“The focus (of these Maltese operators) is to give a service which is reliable, efficient and safe, meaning that no operator wants to charge more for services provided, but this is a reality that needs to be addressed,” he said.

He also said that ATTO is continually in talks with government representatives on the way forward.

A few days ago, the MMF again called for the postponement of the implementation of the directive.

The MMF said that the country must stop pointing fingers to see who is to blame, and instead concentrate on solutions to handle the economic fallout that the EU’s Emission Trading Scheme will have on the country.

The MMF said it firmly believed that the EU failed miserably in properly appreciating and evaluating the negative effects that these regulations will have on Malta and other Mediterranean countries.

The MMF appealed for the country to continue to pull resources in the same direction and continue to make the necessary representations to the European authorities with a united front without politicising this matter as unfortunately, has been the case in recent days with mud-slinging exchanges made in the public domain.

“These trivial attempts did no justice to the prudence and maturity that characterised the handling of this matter to date and have certainly not benefitted the common good. We sincerely appeal to the political forces to spend our limited resources and energies on strategies that will contribute to desired solutions,” the MMF said.

“This does not mean that the country should not undertake a serious and professional analysis as to what went wrong in the communication chain between the public and private sector, leading us to this unfortunate situation. But there will be time for that,” it continued.

“These regulations will go down in the history of the European Union as the fastest tracked regulations as if there was an agenda to expedite the necessary discussion and approval, giving member countries limited time to examine and understand the full implications resulting therefrom,” the MMF had said.