Fit for 55: four ingredients to success

By Isabelle Ryckbost, Secretary General, European Sea Ports Organisation (ESPO), (pictured)
Winter 2021

Isabelle RyckbostOn 14 July this year we did not only commemorate the French Revolution with the Storming of the Bastille in 1789, but we witnessed rather a green revolution. On that day the Commission launched an ambitious package of twelve proposals to make Europe fit for the 55% emission reduction in 2030, as an intermediate step towards reaching the overarching ambition for Europe to be the first carbon neutral continent by 2050.

Four of these proposals will be affecting ports directly. First there is the so called "Fuel EU Maritime" proposal which aims at stimulating the demand for clean energy in shipping by setting reduction targets in greenhouse gas intensity for marine fuels and by foreseeing requirements for the use of onshore power supply at berth. A second proposal reviews the current Alternative Fuel Infrastructure Directive. The "AFIR" proposal for a regulation aims at enhancing the availability of fuel infrastructure and technology for clean energies. For maritime, the proposal sets out requirements for LNG refuelling facilities and proposes strict requirements for onshore power supply in all TEN-T ports. The package also includes a review of Europe's Energy Taxation Directive, including a proposal to start taxing conventional marine fuels as from 2023. Last but not least there is a proposal to bring the maritime sector under the emission trading scheme (EU ETS).

Ports in Europe fully realise that reaching the Climate goals put forward requires full engagement of the whole economy and society based on an ambitious policy. In that sense we are supportive of the initiatives on the table that enhance the take up and use of clean fuels and technologies for shipping, we support a review of the taxation of energy which will incentivise the use of clean fuels and we see for the same reason benefit in including maritime in an emission trading system.

But for Europe's ports, the way these different proposals will be designed is crucial. Some elements are important to take into consideration to make these proposals work for ports. And let me in that context refer to the 4 "C's" ESPO's Chair, Annaleena Mäkilä recently used, in her speech on the occasion of the ESPO award ceremony on 9 November: Coherence, Cooperation Competitiveness, and Co-funding. These four "ingredients" are essential to make the Fit for 55 package work.

For the first time, the strict requirements on what ports need to do in terms of providing infrastructure for clean fuels and technologies for shipping are accompanied by requirements on the side of the users: vessels will have to use the shore-side electricity infrastructure at berth. For years we have been discussing the chicken and the egg problem as a barrier for making real progress in greening of shipping. It is now time to work together with all policy makers and stakeholders to move forward towards investing in technologies that are effectively being used and that lead to effectively reducing the emissions of shipping, both at berth and during navigation. But it will be extremely challenging to keep this coherence all along the process. Different working parties in the Council and key players in the European Parliament as well as different timings for both files could jeopardise the coherence.

But there is not only a need for coherence between AFIR and Fuel EU. To be coherent, the taxation policy should also be brought in line with this strict regulatory framework on onshore power supply. If Europe's wants to see emissions at berth being reduced, if they want to boost the use of the electricity on shore, an EU-wide total tax exemption is needed. We see that the energy taxation proposal is not ambitious enough in this regard, since Member States can opt for an exemption and can choose a partial or total one.

Moreover, in general we miss an overall impact assessment of all fit for 55 proposals affecting the maritime and port sector. What will be the impact of all these proposals together both in terms of achieving the well needed emission reductions and in terms of competitiveness of the European port sector? We do not know.

The competitiveness of Europe's ports should not be jeopardised. And there the Fit for 55 proposals as formulated now contain a serious risk. The Commission proposal for a European maritime ETS covers the emissions from intra-EU voyages and emissions at berth, alongside half of the emissions from extra- EU voyages (both incoming and outgoing voyages). With such a scope, ships can find ways to avoid falling in the scope of the EU ETS and thus avoiding the emission price tag that comes with the EU ETS. If evasion through rerouting of business happens, it creates not only carbon leakage but also business leakage for Europe's ports and the port ecosystem. Equally, while ideologically correct, starting to tax conventional marine fuels that are being bunkered in the EU, without having enough energy alternatives for shipping available at the moment, might take away the bunkering business of certain European ports without any added value in terms of emissions. We must find ways to limit these risks of carbon and business evasion based on a realistic and comprehensive impact assessment of these proposals. We should seriously look at possibilities to widen the scope to the neighbouring countries and, if at all possible, push further for a global solution.

The legislative framework in itself will not be enough to achieve the Climate goals. There is no silver bullet for greening the shipping sector. Different greening pathways are under development. It will more than ever be important for stakeholders to coordinate and work together. Ports face huge investments and must be able to optimise these investments, where it makes most sense. Shipping operators can help by clearly indicating their intentions and needs to the port and/or the responsible investing body, thereby avoiding stranded assets in the port. Looking at onshore power investments, ports need to know as soon as possible if their customers intend to use onshore power supply or will rather go for one of the other alternative technologies allowed for in the legislation. Moreover, ports should know what power needs a certain vessel will need when at berth, in order to plan for suffi cient power during a call.

Ports can only become fit for 55 if the EU is ready to "fund for 55". Many of the investments that will have to be made and facilitated by ports to green the shipping sector will have only a very slow and low return on investment for the port. The port authority is in this case not the polluter, but is taking up its responsibility as a mission driven entity. It will therefore be important for ports to be able to rely on public funding and support to comply with the upcoming requirements for alternative fuel infrastructure in ports. On top of the existing funding mechanisms such as the Connecting Europe Facility, revenues from the maritime EU Emission Trading System (EU ETS) and the penalties levied under the FuelEU Maritime should be used to promote the distribution and use of renewable and low-carbon fuels and technologies in the maritime sector.

The Commission has showed a high level of ambition in preparing these twelve Fit for 55 proposals. It is now important for both the Commission, the Parliament and the Council to work on these proposals with the same ambition to make them as a fi nal package fit for purpose. This will require a lot of dialogue with stakeholders, gathering additional knowledge on possible impacts and being open to adapt these proposals in view of reaching emission reductions in the most effective way. There is a sense of urgency, but optimising the effectiveness of the policy measures will save us a lot of time.