TERMINAL OPERATIONS

No credit where its due

17 years ago

Where else are you taxed on the actions of other people? asks Charles Hammond, who continues to speak out forcefully against the UKs Carbon Reduction Rules because of the way they will affect ports.

Port Strategy: "We have no control over our tenants' emissions," Charles Hammond, Forth Ports

Under the CRC, which could be in force as early as April, port landlords will be made responsible for the emissions of their tenants.

The result will be potentially huge penalties and significant cash flow problems, warns Mr Hammond, chief executive of Forth Ports and vice chairman of the UK Major Ports Group.

Forth Ports, which owns Tilbury and six ports in Scotland, would be entirely responsible for the carbon emissions from all of its port tenants – including flour mills, cement batching plants, pipecoating companies and other intensive energy users. If those businesses were to expand, or new ones to be established, then Forth Ports would pay the penalty for increased emissions.

Forth Ports has consistently built efficiencies into its own consumption of electricity, fuel and water, reducing this year-on-year against the throughputs it handles, says Mr Hammond. However, its tenants use four times the electricity it uses itself.

“We would be happy to be measured on our efficiencies,” says Mr Hammond. “My concern is that we have no control over our tenants’ emissions. The system also takes no account of our own contribution to the environment through encouraging goods on to shortsea shipping routes.

“We have two ironic situations. By the middle of 2011, at least 20% of Tilbury’s power will come from renewable sources around the port – but we will get no credit for that whatsoever in the CRC.

“Secondly, we deal with renewable energy manufacturers in the ports. Suppose we win a shore base contract for Round 3 of the wind farms – all the electricity for making that industry happen will be taxed under the CRC regime and we would get no credit for helping the renewables industry.”

The CRC proposal is that the tax will be based on an initial year of measurement. It is easy to draw the conclusion that ports which are already efficient, but encourage investment, will be taxed and penalised; less efficient ports which put in efficiency measures in a year’s time could reap the benefit.

And while owners such as Forth Ports would carry the CRC liabilities, the costs could not easily be passed on because most tenants have long-term existing lease agreements in place.