EU shipping's €24bn-a-year fossil tax holidays

This paper estimates that the EU gives more than EURO 24 billion per year in subsidies to maritime sector in the form of fossil fuel tax exemptions under the European Energy Tax Directive (ETD) and national tax legislation. 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 qualified 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.

Shipping is currently the only sector that is not yet contributing to the EU’s climate efforts. With 140 million tonnes of CO2/year, EU shipping contributes to climate change more than the bottom 20 EU member states’ individual economies. The sectoral emissions are forecast to further grow by an additional 33 million tonnes of CO2/year. A lack of European climate laws for maritime and massive tax subsidies fuel this trend