It is no rocket science to ascertain how Malta, being an island, depends entirely on completing an efficient air or sea connectivity.
This has always been an extremely sensitive issue. The fly in the ointment is the imposition of the ETS (Emissions Trading System), which as can be expected is putting Maltese operators at a disadvantage.
Recent estimates by the Central Bank of Malta indicate that the inclusion of aviation in the EU’s ETS results in flights to and from Malta are costing an additional €88 million per year.
New emissions-related costs are increasing the price of importing and exporting goods. Current projections by Atto, The Association of Trailer and Truck Operators, indicates an additional cost of around €700 per container. “Malta, Cyprus and Ireland are fully-fledged EU member states yet, EU policies related to maritime and road transport are not considering the specific disadvantages, insularity and geographical realities of these island states,” says Joseph Bugeja, chairman of Atto.
In practical terms, ETS means higher costs for importers, which are inevitably passed on to consumers. Worse still, these policies are distorting fair competition beyond our shores. Recently published reports showed that shipping routes from Asia to the Mediterranean can save up to €100,000 by bypassing the Malta Freeport in favour of transshipment hubs in North Africa.
Malta is doing its part by investing heavily in expanding Freeport facilities and has been active in setting up “shore-to-ship” provision of electricity. Although the ETS is necessary to help address the impacts of climate change, it is significantly affecting us in a negative way. It undermines not only Malta’s position but also Europe’s broader maritime competitiveness. Atto said one operator has already announced a surcharge, adding €272 per trailer for a round trip between Malta and Genoa. This will be reflected in additional charges, starting at €734 per trailer once the ETS is implemented and potentially rising to €1,006 per trailer over time.
With the ongoing conflict in the Middle East, the partial closure of the Strait of Hormuz and Houthi’s war in the Red Sea points to reduced trade passing through the Mediterranean. These rising costs will inevitably be passed on to Maltese consumers, whereas rising bunker prices are prompting shipping lines and freight operators to review the Bunker Adjustment Factor (BAF) applied to freight rates.
When measuring trailer traffic to Genoa, then multiply a surcharge by the 650 weekly trailer movements, this results in an extra €653,900 per week. The additional costs will ultimately be borne by consumers and thus trigger higher inflation. As can be expected, circa 60% of trailers leaving Malta must return empty to Genoa. These trailers still incur the full surcharges, further amplifying costs.
It needs no further explanation to justify why members of Atto solidly voice their concern. One leading international trailer operator has registered an increase of €14,600 per week in fuel-related costs alone, before additional market adjustments. Considering the geographic isolation of islands, it can be argued that policies designed primarily for the continent disproportionately penalise island states like Cyprus, Ireland and Malta.
Let us now see the other side of the coin. Why is the EU implementing these new policies such as The Alternative Fuels Infrastructure Regulation (AFIR), ReFuelEU Aviation, FuelEU Maritime (often referred to collectively with ReFuelEU as the aviation and maritime fuel initiatives), and the revised Renewable Energy Directive (RED III)? There has been a lot of consultation with EU member countries prior to the launching of such key pillars of Fit for 55 package.
This package aims to reduce net greenhouse gas (GHG) emissions by at least 55% by 2030 (compared to 1990 levels) and achieve climate neutrality by 2050. These measures address infrastructure gaps, demand for sustainable fuels in hard-to-electrify sectors like aviation and shipping, and the promotion of renewable energy. AFIR upgrades the earlier Alternative Fuels Infrastructure Directive (AFID) into a regulation with legal binding, directly applicable as it targets all member states. It entered into force in October 2023 and applied from April 2024. Its goal is to build a dense, interoperable network of recharging and refuelling points for electricity, hydrogen, and other alternative fuels to support zero-emission road transport, shipping, and aviation while minimising oil dependence.
In connection with maritime and aviation rules these introduce obligations such as shore-side electricity supply for larger seagoing ships in ports and for inland vessels and electricity supply for stationary aircraft at TEN-T airports. Fuel suppliers at EU airports must ensure minimum SAF mix in all aviation fuel supplied. Sustainable Aviation Fuel (SAF) refers to drop-in aviation fuels that can be blended with or fully substitute conventional jet fuel (kerosene) while meeting strict sustainability levels.
The SAF content was set at 2% from 1 January 2025, increasing to 6% by 2030, with a sub-target for synthetic fuels starting at 1.2%. In conclusion, climate neutrality became legally binding in 2021, when the European Climate Law entered into force. Unless these rules are fine-tuned, there is a risk that maritime trade may avoid Malta ports and relocate to African countries with less stringent climate regulations, thereby undermining the global EU’s emission reduction efforts.
George M. Mangion is a senior partner at PKF Malta
