Impact of EU’s sanctions, plans to lessen the dependence on Russian energy and climate policy discussed at BPO’s EP Debate

The annual BPO Debate at the European Parliament (EP), held online earlier this week, tackled the impact of the War in Ukraine and plans to reduce dependency on Russian energy sources in context of possible consequences for the Baltic and European port industry. Also discussed was the inclusion of shipping in EU’s ETS and risks it entails for the continued competitiveness of the sector.

The meeting kicked-off with the topic that currently dominates everyone’s thoughts. Kimmo Naski, Chairman (BPO), in his opening speech, once again underscored the deep sorrow and worry for the life and wellbeing of the Ukrainian people, expressed by the whole Baltic community. While everyone unites in hope of a quick end to the hostilities, the maritime industry in the Baltic Sea region (BSR) and beyond also cannot ignore its geopolitical and economic impact. Supply chains are being disrupted, not only in Europe but globally and business ties are being cut. The geopolitical shifts we are witnessing right now will have long-term consequences, some of which we can’t even yet identify.

As Andris Ameriks, MEP, observed – while turnover numbers looked well in multiple Baltic ports in the first months of 2022, it is vital to remember that many of the sanctions are yet to take effect, and the full impact of the war is yet to become clear. Uncertainty is the enemy of long-term investments, said Isabelle Ryckbost, Secretary General (ESPO) during the meeting.

The current geopolitical situation only contributes to a certain feeling of unpredictability in the maritime industry, caused by a plethora of environmental initiatives put forth by the European Commission (EC). They often include obligations, which without careful consideration, along the present geopolitical shifts, may greatly impact the competitiveness of the European port sector.
The participants took an in-depth look at parts of two such initiatives, the Fit for 55 package and the European Green Deal (EGD).

Inclusion of shipping in the ETS
The inclusion of maritime shipping in EUs ETS, as part of the Fit for 55 package, introduced by the EC last year, was the topic second only to the one mentioned above.
Timothée Noël, Policy Officer (DG CLIMA), briefly outlined the main reasons for this step and the benefits it brings. The former included the proposal being a key step on EU’s goal to become world’s first climate neutral continent by 2050, an ambition impossible without drastic greenhouse gas (GHG) emission cuts, as well as it being in line with EU’s commitments as part of the Paris Agreement. Noël also emphasized the fact that without direct measures, the already significant amount of emissions from the shipping industry is only bound to increase, as well as the fact that ETS-generated revenue will be used in support of innovation and development of new technologies, required for implementing the emission reduction goals.

While the Baltic Ports Organization (BPO) fully supports the EC in its efforts to combat climate change and the overall scope of the Fit for 55 package, it quickly became clear that some points, such as the one outlined above, require further consideration. The main risks related to the inclusion of maritime shipping in the ETS are that of evasive port calls and modal shifts, which ultimately may lead to lowering the competitiveness of European ports. The EC promises to monitor how the market implements this policy and believes that it is not possible for the EU ports to suddenly lose the majority of their cargo due to its introduction. While the latter is technically true, it is absolutely key to remember that any business, once lost, will be incredibly hard to reacquire, even after the regulations change reactively as an effect of the monitoring process. And it is only prudent to assume that non-EU ports are watching the situation closely and preparing to seize any opportunities it may offer them.

The right way to go about shore power
Participants of the debate also shared various insights regarding some other proposals introduced as part of the Fit for 55 package, such as the obligation for ports to provide on-shore power (OPS) facilities to berthing vessels.

Given the cost of OPS implementation, there is a need for further discussion between the industry and the policymakers in order to focus these efforts in ports that will most benefit the overarching goal of emission reduction. Simply put, money needs to go where it is needed most. OPS technology is vessel and port specific, solutions vary within a specific vessel type, not just cross-type. Additionally, more thought needs to be given the sufficient supply of necessary grid capacity. Given the current lack of coordination between energy-related proposals and the OPS one, as noted by Bogdan Ołdakowski, Secretary General (BPO), a more transparent dialogue is paramount in order to maximize the proposal effectiveness.

And speaking about money, it goes without saying that a great deal of the uncertainty mentioned earlier could be alleviated by decisive and transparent ensurance of sufficient public funding, without which most of the goals and obligations making up the various climate initiatives won’t be possible to fulfill.

Way forward
Right now, it is impossible to foresee how the war in Ukraine and associated geopolitical turmoil will affect the pace of implementation of initiatives such as the EGD and Fit for 55. Parts of the proposal will definitely be heavily discussed in the EP in the coming weeks and months. As for now the way forward is to try and adapt to the new situation, carry on with the plan and accomplish various goals where it is most feasible.

One of the most crucial issues to tackle in the near future, will be Europe’s energy policy, supply and diversity of energy sources. The recent REPowerEU proposal, focused on reducing EU’s dependence on Russian fossil fuels, seems to have come just moments before becoming drastically more important. First step will be the change in gas suppliers, with plans to source liquefied natural gas (LNG) from the USA and Qatar. Next come all other renewable fuels, such as Hydrogen and Ammonia, with bioLNG possibly acting as an interim solution.

The shift from fossil to renewable fuels will create new opportunities for ports, but also bring new challenges. They will need to find new revenue sources for the one’s lost. In the end, they may very well become hubs for green energy but the path leading there is one to be treaded carefully.
The BPO would like to extend special thanks to Mr Andris Ameriks, for once again helping us in organizing our annual EP Debate.