Climate rules will tax aviation and shipping, Malta business lobby braces itself

The Brussels representative of Malta’s Chamber of Commerce and hoteliers’ lobby MHRA has warned that the European Commission’s climate change legislative package could impact seafaring nations like Malta.

The European Commission yesterday published its Fit-for 55 package, a legislative tool to deliver on the European Green Deal, to reduce greenhouse gas emissions by 55% by 2030.

The package includes several proposals, some of which are new, such as the Carbon Border Adjustment Mechanism, and others revising existing legislations, such as the Energy Efficiency and Renewable Energy Directives, the Energy Tax Directive, and the Emissions Trading Scheme.

One of these laws incentivises clean energy for the transport sector, but includes taxing kerosene for aviation and maritime sectors over the next decade. Brussels wants to introduce a gradual minimum tax-rate on aviation fuel, which is currently exempt, plus a specific sectoral emission reduction target for shipping.

Malta Business Bureau president Alison Mizzi said the proposal had to be “studied in detail to quantify the impact” on peripheral countries such as Malta and other island states entirely dependent on these two sectors for the export and import of all cargo as well as tourism activity.

“These legislations will surely impact businesses and consumers, whether directly or indirectly. It is accepted that the status quo is not sustainable. The MBB consistently said that the question is not if we should meet ambitious climate targets, but how to achieve this without undermining the competitiveness of business, particularly SMEs, and those operating in the periphery of the EU,” Mizzi said.

Mizzi also said the EU measures had to be in line with international rules to avoid retaliation by other global competitors that would interpret EU unilateral measures as discriminatory towards them.

“This is the EU’s commitment to lead the global fight against climate change. However, it is equally important that Europe leads the way while ensuring that it does not do this on its own. We need to ensure a collective effort to avoid unfair competition and the risk of carbon leakage.

“This regulatory package needs to enable other frameworks adopted by the EU to support the transition towards a green and digital economy. EU Funding Instruments, including Cohesion Policy and the Recovery and Resilience Fund are important funding tools providing the enabling conditions for business to undertake investment contributing towards a Greener Europe. The path towards a Greener Europe is expected to contribute towards new investments and the creation of new green jobs.”

Key industry groups in Europe have been actively lobbying against some of the upcoming proposals under the 'Fit for 55' package, to weaken short-term climate action, a new report published by the think-tank InfluenceMap revealed last Monday.

A survey of 216 industry associations, which gave feedback to the commission on EU climate goals in 2020, revealed only 36 percent of the support the plan to cut emissions by 55-percent by 2030.

Under the fit-for-55 package, the most-lobbied files have been the EU Emissions Trading System (EU carbon market) and the proposed carbon border tax.

The reform of legislation on renewables and energy taxation has also sparked intense lobbying battles, with the power and renewables sectors calling for greater ambition and heavy industry and fossil fuels groups pushing back. In their lobbying activities, groups representing transport and heavy-industry sectors were particularly resistant to policies being updated or introduced in the fit-for-55 package, despite their support for net-zero emissions goal by 2050 and climate science.

Representatives in sectors such as automotive (ACEA), cement (CEMBUREAU), chemicals (Cefic), refining (FuelsEurope) and steel (Eurofer) were identified as "powerful blockages" to regulatory proposals of the commission. Aviation and shipping industry groups - namely, Airlines for Europe and European Community Shipowners' Associations - were in the most disagreement with the EU's attempts to implement the 2015 Paris Agreement goals.