As Europe goes green we will all pay a hefty price

A new EU-wide carbon tax on shipping coming into force in January will weigh down on beleaguered European consumers and Malta is no exception, industry leaders warn. 

The new tax will make imports and exports significantly more expensive as the EU extends the CO2 emissions trading scheme (ETS) to shipping companies. 

Malta being an island economy dependent on shipping for its trade connections will be particularly impacted, industry leaders speaking to MaltaToday said. 

The ETS is part of the Fit for 55 package, the EU’s plan for a green transition intended to reduce climate-harming carbon emissions. 

Workings provided to this newspaper by experts in the field show that a roll-on-roll-off trailer boarding the freight ferry between Genoa and Malta would incur an additional cost of between €90 and €100. Similar workings will impact containers reaching and leaving the Freeport in Marsaxlokk. 

But other costs in the form of higher or new road tolls across Europe will also have to be taken into consideration. 

The freight cost for a trailer coming from central Europe boarding the Genoa-Malta cargo route is currently around €3,500 and this will increase by around 3% as a result of the ETS surcharge. But road toll charges in Germany and other EU countries coming into force over the coming months could contribute an additional 3% increase, a leading industry figure who chose to speak anonymously told MaltaToday. 

Grimaldi Lines which operates a public service obligation ro-ro service between Malta and Italy has already informed Maltese companies of a new surcharge on freight as a result of the emissions trading scheme being extended to shipping companies in January

“Depending on how far north the trailer comes from, we could easily be seeing cargo transport costs for importers and exporters increase by anywhere between 6% and 10% next year,” the source said. 

The end result will see consumers, already reeling under the burden of higher inflation, picking up the tab. 

The impact of these additional costs should not be underestimated said Frederick Schembri, general manager at Torrent Pharma, an Indian pharmaceutical manufacturer based in Hal Far. 

“Any increase in the cost to import goods to Malta will not only hurt industry but also ordinary citizens who are already feeling the pinch of higher food prices,” he told MaltaToday. 

But industrialists also worry about the impact of higher transport costs on Malta’s export industry. 

Schembri warned that the Maltese industry runs the risk of not remaining competitive enough with its European counterparts such as Portugal.  

“We are an island economy and any additional cost to freight and external logistics will have an impact on us. We cannot simply accept surcharges or any other additional costs lightly because we do not have alternative modes of transport to compensate,” he insisted. 

It is a sentiment shared by Norman Aquilina, CEO of the Farsons Group, a beverage manufacturer, importer and exporter. 

He said logistics will always be a key factor impacting Malta’s competitiveness and higher costs such as the ETS surcharge will only make it harder for industry. “One must note that the cost of logistics has often been a make-or-break consideration for various manufacturers when negotiating export contracts,” he noted. 

But Aquilina also raised concern over the possible impact on Malta’s trade connectivity as a result of the ETS. 

Norman Aquilina, Group CEO Farsons

“Apart from shipping cost, connectivity is another important consideration with indications this risks being compromised following the coming into force of the ETS,” he warned. “The importance of having regularly serviced shipping routes, offering an efficient container delivery lead time, is not to be under-estimated.” 

The European market is moving in the direction of increasing cargo taxes to reflect the environmental damage caused by the transport sector but another industry source who chose to remain anonymous expressed skepticism over the EU’s green direction. 

“The net result will not be a reduction in trade, at least that is not what everyone hopes for, or cleaner transport because these are still not widely available, but simply a transference of costs onto consumers that are already feeling the brunt of a higher cost of living,” the source said. 

The EU’s Fit for 55 package translates into a number of green taxes and the introduction of ETS next year will not be the last as the bloc tries to curb CO2 emissions. 

“The next two years will see more of these taxes being introduced but it is still not clear to me that taxing the transport industry will encourage people to shift behaviour when the alternative green technology is still not widely available. I believe Europe would have been better served investing heavily in alternative green transport before opting for a tax strategy that will only burden industry and consumers with more costs,” the source said.