Editorial | Green taxes risk harming Europeans and European industry

January 2024 will usher in new carbon taxes for cargo ships across the EU, essentially making cargo transport more expensive.

Admittedly, these taxes are intended to hold the shipping industry responsible for its contribution to harmful carbon dioxide emissions as the EU pushes forward with its bold green transition.

The intention is to punish the polluter and hopefully encourage a shift in behaviour and further investment in technology that is less harmful to the environment.

However, the extension of the emissions trading scheme (ETS) to the shipping industry risks punishing Malta and other outlying islands significantly more than other EU member states.

Malta is a small island economy on the periphery of the EU and depends significantly on shipping and to a lesser extent on air freight for its trade connections. We do not enjoy the luxury of road and rail transport thus having more alternatives.

Every trailer reaching Malta from central Europe via the Genoa-Valletta shipping route will see its cost increase between €90 and €100. Similar figures have been quoted for containers reaching the Freeport.

These are not insubstantial costs and they are expected to be higher in subsequent years.

The underlying reality is that imports and exports to and from Malta will cost more. This will create two problems.

The higher cost of imports will end up being passed on to the consumer. Middle to low income earners will continue to see their disposable income erode further.

And the higher cost of exports will contribute to the erosion of Malta’s competitiveness.

Two business leaders – Torrent Pharma general manager Fredrick Schembri and Farsons Group CEO Norman Aquilina – have already spoken about the sensitivity of adding more costs to the transport and logistics aspect of Malta’s export industry. Speaking to sister newspaper MaltaToday, Aquilina said the cost of logistics is very often what makes or breaks an export deal and Schembri spoke of the risk Malta faces in losing out to countries like Portugal.

Whether the ETS will reach its aim of encouraging cleaner transport remains doubtful, which leaves us with a situation whereby producers and consumers will be charged more with very little impact on the environment.

The EU could have been better served had it relaxed its State aid rules and encouraged public investment in the development of cleaner shipping alternatives to speed up the process. As things stand, the stick is being wielded at a time when the alternatives are very few.

Unless the green transition is accompanied by a sense of social and economic justice it will simply hurt society’s weakest and ruin countries and communities on the periphery. this will be the perfect recipe for social unrest that will lead to strong push-back against the green transition.

But there is also the localised reality of Malta being an island economy that puts it at a natural disadvantage with other mainland EU states.

Government’s option now are very limited but this leader believes a high level task force should be assessing the impact of the EU’s new green taxes on the domestic market and the industry. Based on quantifiable outcomes of this assessment, the government must lobby within the EU to extract some form of exemption.

Malta cannot risk having its manufacturing industry undermined by these additional costs because the island’s insularity puts it at a natural disadvantage.

A greater EU-wide effort must be done to reduce the costs of production of environmentally-friendly products and alternatives, while supporting citizens in their attempt to access the green market.

Unless massive public investment goes to support private endeavour, the green transition will simply be a nightmare for Europeans and European industry , and Malta will be no exception.