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Shipping and fossil fuel tax exemption

(Transport and Environment, 25 Sep 2019) The EU gives more than €24 billion per year in subsidies to international shipping in the form of fossil fuel tax exemptions under the European Energy Tax Directive (ETD).

This is estimated based on national tax rates applicable to road diesel – used by trucks – in EU member states. Each tonne of CO2 emitted by fossil ships causes the same level of climate change as the CO2 emitted by fossil trucks. Hence, there are no ethical or environmental grounds to treat the maritime industry more leniently in European environmental regulation. In the context of the continent’s climate objectives, this is not only an anachronism but also a perverse incentive for climate pollution.

EU should as a matter of urgency close this environmental gap by including shipping in the EU Emissions Trading Scheme. Unlike the ETD, the revision of the ETS Directive can be achieved by qualitative majority in the Council under the ordinary legislative procedure (OLP). This would generate over EURO 3.6 billion/year in revenues (or EURO 7.2 billion/year with a CO2 multiplier), that can be reinvested into greening the EU economy, including the maritime sector: for instance, investments in green port infrastructure and operational subsidies for first-movers. The price impact of the ETS on consumer goods will be insignificant, measured in a few euro cents.

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Transport and Environment, 25 Sep 2019: Shipping and fossil fuel tax exemption