Europe’s Ports Concerned by Signs of Business Leakage Ahead of ETS

transshipment port
ESPO is concerned that volume will move to non-EU transshipment ports due to a loophole in the EU ETS (Tangier Med seaport photo)

Published Sep 22, 2023 12:51 PM by The Maritime Executive

The European Sea Ports Organisation (ESPO) is expressing its serious concern about the first signs of carbon and business leakage due to the EU emission trading system (ETS) to the European Commission. The organization, which represents the port authorities, port associations, and port administrations of the seaports of 22 EU Member States and Norway at the EU political level, has repeatedly said that it supports an emission trading scheme as an instrument for greening the shipping sector while warning that shipping could divert to neighboring ports to avoid the charges under the ETS.

Specifically, ESPO is highlighting a loophole in the implementation of the ETS as it is now structured which they believe some carriers are already planning to employ. When ships call at an EU transshipment port, the last leg between the transshipment port and any other EU port is subject to ETS charges for 100 percent of the journey. According to ESPO, if the ships call at a non-EU transshipment port, only 50 percent of the journey is accounted for in the ETS.

The European Commission is sensitive to the concerns of what is being called carbon and business leakage into neighboring non-EU ports and recently held a public consultation on the list of non-EU neighboring ports that would fall under the “transshipment clause” introduced in the directive. The intent is to limit the risks of carbon and business leakage once the EU ETS maritime comes into force.

ESPO is expressing concern at the EC’s solution which is not to consider calls at some transshipment ports neighboring the EU as a “port of calls,” as defined in the ETS. For ESPO, this is only a partial solution and raises questions on how a transshipment port is defined.

The ETS proposed to judge transshipment ports based on volume setting 65 percent as the threshold, which ESPO calls a very high threshold that most ports will not be able to meet. EPSO agrees with the EC definition of Tanger Med in Morocco and East Port Said in Egypt as transshipment ports, but many ports/terminals around Europe are also building up their transshipment capacity.

“We see a real ramping up of investments in additional TEU capacity in ports and new terminals in neighboring countries, including investments realized by major shipping lines in these ports, and we also hear about first rerouting movements outside Europe,” said Zeno D'Agostino, Chairman of ESPO. “This reinforces the idea that shipping lines, where relevant, are preparing their way out of the EU ETS maritime.”

ESPO’s position is that for the maritime EU ETS to be a success, the European Commission must make sure that the ETS implementation safeguards the competitiveness of European ports, and avoids carbon and business leakage to ports neighboring the EU.

“One must realize, that once evasion is established, and trading routes have changed, it will be very difficult to reverse the negative developments,” commented Isabelle Ryckbost, ESPO Secretary General.

ESPO is calling for monitoring ahead of the application date, as they believe rerouting and evasion movements are already in preparation or happening. Moreover, the monitoring should happen continuously, not only with a report every two years. ESPO concludes by saying it hopes for an open, continuous, and constructive dialogue with the Commission allowing it to map adverse impacts and signal evasion at a very early stage, to achieve the desired results from the implementation of the ETS.