Methane and nitrous oxide emissions are included
The European Parliament, Council and Commission have reached a preliminary agreement on including maritime emissions in the EU Emissions Trading Scheme (ETS), in a move hailed by green groups as a “watershed moment”.
Environmental campaigners believe that including the maritime sector in the EU ETS will encourage shipping’s journey towards decarbonisation as well as accelerate emission reductions among non-maritime sectors.
The provisional agreement on shipping is subject to an overall agreement on the ETS revision, later this year or next.
As well as all the emissions from trips within the EU, 50% of the emissions from journeys between EU ports and third countries will be included.
A phase-in period will apply, meaning that shipping companies have to surrender allowances that cover 40% of their emissions in 2024, 70% in 2025 and 100% in 2026.
The decision to include methane and nitrous oxide in the ETS as well as CO2 was praised by climate NGO Transport & Environment (T&E).
The inclusion is “a clear signal that LNG is not a clean solution for shipping,” noted T&E, pointing out that ships running on LNG would be required to pay for everything they emit.
Jacob Armstrong, sustainable shipping officer at T&E, said: “The EU’s deal marks a watershed moment for shipping decarbonisation. No longer will shipping be let off the hook for its massive climate impact. No longer will international emissions be ignored by national policymakers.
“With this ambitious ETS covering all greenhouse gases, offshore vessels and ensuring funding for green shipping, the EU has thrown the gauntlet down to other jurisdictions like the US, China, and Japan to make this hugely important first step towards zero-emission shipping.”
Jim Corbett, the World Shipping Council’s (WSC) environmental director for Europe, said: “We are ready, and we hope that the EU ETS for maritime will help drive investment in renewable energy as well as in the supply networks needed for the alternative maritime fuels necessary to make the transition.”
The WSC was encouraged by the agreement setting in motion the next steps for the EU to include all GHGs as well as outlining steps towards a life cycle perspective.
Developing a life cycle perspective on the pricing of ETS allowances will reflect not only fuel emissions when consumed but also GHG emissions from marine fuel production, it observed.
Corbett added: “Including all GHGs – CO2, methane and nitrous oxide – in the EU ETS is an important step. But only when the EU ETS takes a full life cycle perspective will it reach its real potential, increasing the competitiveness of truly renewable fuels.
“A correct price signal is the key to driving investment in the green energy necessary to produce sustainable fuels. With the agreed phase-in, there is a window of opportunity to move forward with a rapid adoption of life-cycle perspectives. This will also align the EU ETS with FuelEU requirements, promoting the uptake of new fuels.”
As many as 20m ETS allowances, which correspond to €1.5bn under the current ETS carbon price, have been earmarked for maritime projects in the Innovation /Climate Investment Fund.
Sotiris Raptis, secretary general at the European Community Shipowners’ Associations (ECSA), said: “Decarbonising shipping is not a question of ‘if’ but a question of ‘how’. Setting aside part of the ETS revenues for maritime is a victory for the decarbonisation of the sector.
“Dedicated support through the Innovation Fund is key to bridging the price gap with clean fuels, improving the energy efficiency of ships, fostering innovation and building the infrastructure in ports.”
The ECSA also welcomed the upholding of the “polluter-pays principle” through mandatory requirements for the pass-through of the EU ETS costs to the commercial operators of the vessels.
However, concerns exist that the geographical scope of the EU ETS could harm the competitive position of EU seaport terminals, by incentivising shipping lines to call at non-EU ports, also known as ‘carbon leakage’.
The Federation of European Private Port Companies and Terminals (FEPORT) outlined worries that the extra-EU application means that shipping companies can avoid their financial implications by adding a call to a non-EU port.
It stated: “The risks of cargo diversion to the advantage to non-EU ones once ETS enters to force are real and once cargo is lost, it is irreversible and almost not possible to attract it again.”
FEPORT members have called for the EU Commission to continuously monitor impacts regarding carbon leakage as well as cargo diversion at the expense of EU ports.
“It will also be crucial that the EU Commission adopts immediate measures if any impact regarding carbon leakage or cargo diversion is indeed established,” added FEPORT.
