The US has shut out the cruise industry from its $2 trillion pot of bailout money but in Europe, everything is still up for grabs. It should not be given a blank cheque, writes Sönke Diesener.
Sönke Diesener is transport policy officer at the Nature and Biodiversity Conservation Union (NABU).
The lobby group Cruise Lines International Association (CLIA) has sent a letter to the European Commission asking for a series of aid for the sector.
We don’t know what the response will be. But handing over public money to this giant tax-dodging offshore polluter, with no strings attached, should make both economists and environmentalists feel seasick.
For the last two decades, the cruise industry has enjoyed a boom, with several years of double-digit growth. Cruise companies tripled their fleets, and their increasingly giant ships brought hordes of tourists to many European ports.
For shareholders, the cruise companies were cash-printing machines working in a low cost, low wage, almost zero tax environment. Carnival Corporation, the biggest of the global cruise giants, in 2016 declared a 17% net profit from their revenue, but a tax “burden” of only 0.3%.
The environment was also being short-changed. Cruise ships have for years typically run on a much cheaper, dirtier fuel type than used in road vehicles, High Sulphur Fuel Oil (HSFO). On land this has long since been banned even in power stations as too polluting.
Last year we learnt that the ships of just one company, Carnival Corporation, emit 10 times more health-damaging sulphur oxides (SOx) than all of Europe’s 260 million cars.
This externality imposed on society was supposed to be cracked down on by tougher global sulphur standards on all ships this year.
But the cruise industry’s response has largely been to install “scrubber” devices – which do successfully capture air pollution using sea water – but then return thousands of tonnes of contaminated washwater to the sea, containing a cocktail of chemicals which can build up in the marine food chain, and have been linked to several cancers.
Enjoy your sushi on board.
After it became clear that cruise ships were early spreaders of coronavirus in February, the industry was brought to a halt. Now, it has almost no revenues. In good times, cruise lines have shunted the true cost of their operations onto others, so it’s no surprise they now seem to have few friends in bad times.
The US has given the industry the cold shoulder. The largest US-headquartered cruise companies are registered in the Bahamas, Panama, and Liberia to avoid US wage laws, labor laws, and nearly all federal income taxes. Decades of breaking environmental laws in US waters has also not endeared cruise lines to US politicians.
While we wait to see the response of the Commission, member states seem more eager to prop up this industry.
TUI group, the world’s biggest tourism company and owner of TUI cruises, asked for state aid in Germany and in return was granted a €1.8 billion loan by public bank KfW.
As the cruise industry suffers, so too do European shipbuilders and suppliers. As Germany’s Federal Ministry of Economics announced this month, Germany, France, Finland, Italy and Norway have agreed principles on how to suspend the repayment of debts for cruise ships financed by state export credit guarantees for one year.
Germany alone is currently securing payment obligations for the financing of cruise ships manufactured in Germany of around €25 billion.
To use public money to secure these investments is already quite dubious for an industry that chooses to register its ships and corporations in tax haven locations outside Europe.
But if taxpayers money is used directly to help the cruise industry, it must drastically change its attitude towards nature, people’s health, and our climate.
There is a chance for governments to respond to the current crisis in a way that also adjusts our societies to the even more severe multiple crises that climate change is bringing our way.
It is crucial to link state aid to binding criteria that will lead to more social and environmental friendly behaviour of the recipient, especially in an industry that has been at the centre of criticism due to its woeful performance on workers rights, climate, and air pollution.
NGOs don’t want to fight bailouts at the cost of the sector’s employees. Indeed they must be the first to receive any state support, and better working conditions should be tied to any rescue package.
On climate and air pollution, we ask decision makers to link any state aid to the cruise sector to three binding criteria: ban HFO immediately and switch to cleaner distillate fuels; make use of shore power mandatory in all European ports it is available, by 2023; and climate neutral cruises by 2030.