Photo: Henrik Hamrén

As signs of global heating become more apparent, the estimated carbon emission budget is running down and the possibility of meeting global temperature targets is getting depressingly unlikely. More and more sectors are finding that they will have to pay for their carbon emissions. 

After all, economists are fond of pointing out that the most cost-effective way to meet emission targets is to put a price on emissions. The idea is that having to pay will press emissions downwards by making them more expensive, which in turn will stimulate energy efficiency and innovation, and make alternatives more attractive. Given the proper signals, that is, baking the social costs of negative environmental impacts into the price of products, will unleash powerful market forces and slash emissions in the best way possible. According to theory.

That logic runs, however, into the brick wall of opposition from those who risk having to pay up. Companies and consumers have gotten used to the comfortable habit of passing on the bill for environmental damage on to someone else, some other place, some other time. 

Weaning the EU off fossil fuels will require political leaders to make the proverbial tough choices. There are strong arguments for some kind of support for the most needy of the losers. But not support in the form of exemptions for all. 

The fishing sector has, so far, avoided having to pay for its emissions. In order to understand where we are today, it is useful to take a look at how we got here. 

There are various explanations for fisheries’ avoidance of carbon pricing. One may be that as fisheries need to be regulated in order to avoid the Tragedy of the Commons from depleting fish stocks, the regulators are in some way expected also to guarantee fishers incomes. 

A more formal reason is that fisheries were included with agriculture in the Treaty of Rome (a forerunner to what has grown to become the EU) of 1957. There, under Article 39.1(b), an objective of the Common Agricultural Policy is “to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture”, where “agriculture” (under Article 38) also includes fisheries. This same language is basically  still in the Treaty on the Functioning of the European Union (TFEU).

A more practical justification is that fishing vessels by their nature can avoid fuel taxes and other regulations by bunkering in other countries, inside or outside the EU. At least, the larger, more mobile ones can.

At the same time, exemptions from fuel taxes or other carbon pricing is a subsidy, recognised as harmful to fish stocks and by extension the environment and the fishing sector itself. Exemption from carbon pricing reduces fishing companies’ costs for a fuel, a major running cost in the sector. They help a fishing vessel and the fleet as a whole to catch more fish than they otherwise would have. This allows fishers to continue to fish on stocks that are below sustainable levels and disturbs a balance between economic profit and ecological sustainability. 

In short, subsidies delay downsizing of fleets that have an overcapacity in relation to the sustainable catch. The European Commission’s Green Paper from 2009 identified overcapacity as a root cause of a number of problems in the fisheries sector: pressure for fishing quotas that are too high, depleted stocks, poor profitability and poor compliance with rules. They of course increase the impact of fishing activities on the marine environment. 

Making fisheries “fit for 55”?

In July, 2021 the European Commission released a broad package of proposals for measures to reach the goal of a 55 per cent reduction of greenhouse gas emissions by 2030. Called “Fit for 55”, the package included proposals for a revision of the Energy Taxation Directive, a reform of the Emissions Trading System and an update of the Effort Sharing Regulation, as well as a number of other proposals. 

In December 2022 negotiators from the European Parliament and the Member States agreed to a revision of the ETS directive. The 2030 target was sharpened from 43 to 62% below emissions 2025. A separate new ETS 2 was agreed for fuel for road transport and buildings, to be established by 2027. But again, emissions from fisheries (and agriculture) escaped a carbon price.

The Commission has proposed extending the Energy Taxation Directive to cover fisheries, albeit at a much lower level than, for example, road transport. But even that proposal looks dead in its tracks due opposition from some Member States where fishing is a more important sector. 

That leaves the Effort Sharing Regulation with its mandatory targets for national emissions from the non-trading sector, covering road transport, buildings, small industries, waste, and agriculture (including fisheries). In March this year, the 2030 target for the ESR, covering about 60% of total emissions, was sharpened from -29% to -40% (compared with 2005). But the commitments vary from country to country, ranging from - 10% in Bulgaria to -50% for Denmark, Germany, Luxembourg, Finland and Sweden. 

The obligatory extension of the ETS to ETS 2 will reduce emissions from road transport and buildings. Member States may, if they wish, bring in other areas such as fisheries under the ETS. But as this is optional, that paves the way for a messy and contentious process on the national level. Different sectors can be expected to be jockeying for continued exemptions, that is, subsidies to their fuel use.

The importance of the fishing sector for the economy, on the one hand, and national carbon emissions, on the other hand, varies. For example, in 2020 Sweden used about 15 times as many litres for fishing fuel per €million GDP as Germany did. Denmark used over 30 times as much as Germany while Spain, Greece and Croatia used about 50 times as much as Germany. There is a clear risk for what the Commission has dubbed as “harmful effects of tax competition” between fishing countries.

At the same time, in many countries the targets will be difficult to reach even without exemptions. 

There are good reasons for Member States to opt to include fisheries in ETS 2. The EU has sweetened this option in three ways. On the one hand, the Member States will have to auction off the emission rights, and can use the funds as they please.  On the other hand, there is financial support available to decarbonise the fishing sector. Also, given the construction of the ETS 2, it means a lot less red tape. 

Under Art. 14 in the ESR, Member States are to have sent in draft updated integrated national energy and climate plans by the end of June, 2023. The Commission may then make recommendations for improvements before the final updated plans are submitted by 30 June, 2024. With the new, sharper target of the ESR on the one hand and the drive for decarbonisation of the fishing fleet on the other, this is a good opportunity for the Commission to encourage Member States to include fishing in the ETS 2. 

There are both incentives and potential opposition for finally putting a carbon price on emissions from fisheries. A report to the Swedish government recently proposed extending the ETS 2 to all non-ETS sectors. 

Given the negative impact of fuel subsidies on the marine environment, there is good reason for those concerned with the marine environment to keep a close watch on those plans. It is time to ensure that European Fisheries will finally get a climate price. 

Text: Charles Berkow

Fotnotes:

1) The ETS directive uses the categories in the 2006 IPCC Guidelines for National Greenhouse Gas Inventories to identify sectors. See Annex III in the updated version of Directive 2003/87/EC. According to the 2006 IPCC Guidelines, Volume 2 section 3.5.3, emissions from commercial fishing are to be reported under the Agriculture/Forestry/Fishing category in the Energy Sector. Correspondingly, the ESR regulation can be assumed to use the same categories, meaning that emissions from fisheries are in the same category as emissions from agriculture. 

2) This follows from Article 30j in the updated version of the ETS directive, 2003/87/EC.