On several occasions, FEPORT has warned about the risks of cargo diversion[1] resulting from the entry into force of ETS for maritime shipping.
While FEPORT is supportive of the ETS, it has underlined the high risk of evasion which will soon threaten the integrity of the ETS, leading to higher emissions from longer voyages whilst failing to push shipping companies to green their fleets.
Fewer allowances being auctioned will also mean less revenues available for the decarbonization of the sector. Finally, evasive port calls will negatively affect employment and business activity in certain ports in the EU, and undermine their strategic role as hubs for transport, renewable energy, and connectivity.
In its recent reply to the consultation held by the EU Commission on the list of non-EU neighbouring ports that would fall under the “transshipment clause”, FEPORT expressed its serious concern about the materialization of fears when it comes to carbon and business leakage due to the limited scope of the current legislation.
More is needed to ensure monitoring and effective prevention of carbon and business leakage from EU ETS Maritime.
FEPORT fully supports the inclusion of Tanger Med and East Port Said in the list of neighbouring container transhipment ports as they both exceed the share of 65% transhipment containers and are located less than 300 nautical miles away from the EU. Even more importantly, both ports are important competitors to EU ports when it comes to transhipment traffic and could gain a competitive edge as a consequence of the extra-EU application of ETS Maritime.
However, FEPORT would also like to stress the importance of close and continuous monitoring of other non-EU ports to ascertain whether they exceed the 65% share of container transhipment traffic and should therefore be included in the Annex of the Implementing Regulation.
It is also crucial to monitor whether transhipment evasion happens via non-EU ports that do not meet the 65% threshold but nevertheless compete with ports in the EU for transhipment cargo.
Shipping companies can avoid the costs associated with the extra-EU application of EU ETS in three ways (options):
Shipping companies change the order of their port calls and call at a non-EU port before calling in the EU. For example, a ship originating from China could call at Tanger Med first before calling at a port in the EU.
Reconfiguration of shipping routes: Cargo is dropped off in a non-EU transhipment port and then distributed via smaller (feeder) vessels to EU ports. Cargo will in this scenario still reach the EU, but transhipment traffic will be relocated to non-EU ports. In a similar vein, EU ports could lose transshipment business for cargo that is destined to non-EU ports.
Shipping companies will stop using EU transshipment ports for voyages where the final destination of either the ship or the container is outside the EU.
FEPORT believes that option 1 is to a certain extent addressed for ports that are included in the Annex of the Implementing Regulation as they will be excluded from the definition of port of call and therefore not count as far as the submission of allowances under EU ETS maritime is concerned.
However, replacing an EU port by a “neighbouring container transhipment port” listed in the Annex can still allow shipping companies to avoid part of the allowances due for the intra-EU part of the voyage.
It remains possible to avoid paying into the ETS by changing the order of port calls using ports that are not included in the list as they do not meet the threshold of 65% container transshipment traffic. Adding an additional call to, for example, a port in the UK will still allow shipping companies to avoid ETS costs.
The second option of dropping off cargo in non-EU transhipment ports and then distributing it to the EU via different vessels, also remains an option for shipping companies to avoid ETS costs, even when using ports that are included in the list of neighbouring container transshipment ports. The reason being that when cargo is transported from neighbouring transhipment ports such as East Port Said or Tanger Med, shipping companies are only required to pay allowances to cover the trip between said ports and the destination in the EU, which of course allows significant cost savings as compared to a scenario where the shipping company needs to pay allowances to cover an intercontinental voyage originating from North America or East Asia.
The third option regarding voyages where both the origin and the destination port are outside the EU is not addressed and shipping lines are strongly incentivized to skip transhipment ports in the EU.
All above mentioned cases show that a strong monitoring of EU ETS Maritime is needed to propose timely measures in case any negative impact on employment or business activity in EU ports is established. Action needs to be taken as soon as possible as we are getting closer to the materialization of the fears.
FEPORT therefore reiterates its support for article 3gg(3) of the revised ETS Directive as it requires the Commission to actively monitor possible evasive behaviour and propose measures if any negative impact is found. The strong monitoring should rely on early warning indicators and also focus on possible evasion via ports that do not meet the threshold of 65% container transhipment traffic. Only then can adverse impacts be established on time and measures taken before reconfigurations of shipping routes at the expense of EU ports become irreversibly entrenched.
Source: FEPORT