Shipping-EUETS
Reducing Maritime Emissions: The EU's Ambitious Climate Initiative
In a significant move to combat climate change, the European Commission unveiled the Fit for 55 package in July 2021. This initiative sets a clear target: reducing carbon emissions by at least 55% by 2030 compared to 1990 levels. A pivotal component of this package involves a comprehensive revision of the EU Emissions Trading System (EU ETS). To ensure the maritime transport sector plays its part in the EU’s climate ambitions, the Commission proposed extending the scope of the EU ETS to encompass CO2 emissions from large ships (those exceeding 5000 gross tonnages), regardless of their flag.
Scope and Compliance:
Initially, the EU ETS will apply to vessels engaged in the commercial transportation of cargo or passengers with a gross tonnage exceeding 5000. According to the “polluter pays” principle, commercial operators or charterers will reimburse ship owners for allowances required to cover their emission-related costs.
To ensure a smooth transition, shipping companies will only need to surrender allowances for a portion of their emissions during an initial phase-in period, gradually reaching 100% after three years.
In 2024, the inaugural year, only 40% of emissions falling under EU ETS must be surrendered. This percentage increases to 70% in 2025, and beyond that, 100% will be required. EU ETS in the maritime sector will encompass 100% of emissions within EU ports and 50% of emissions from voyages between EU and non-EU ports. The monitoring of emissions will be conducted in accordance with the EU Regulation on the monitoring, reporting, and verification of CO2 emissions (EU MRV). Additionally, other greenhouse gases such as methane (CH4) and nitrous oxide (N2O) will need to be reported in the EU MRV from 2024 and included in the EU ETS starting in 2026.
With the maritime industry not receiving free allowances, ship operators will need to surrender EUAs for every ton of CO2-equivalent emissions, significantly impacting operational costs. Given the current EUA prices, this will substantially affect vessel operational expenses.
Solutions
Operators have two primary avenues for compliance with the EU ETS: purchasing EUAs or reducing emissions. Strategies for emission reduction include lowering fuel consumption and adopting low-carbon or renewable fuels. While both approaches are critical, forthcoming regulations like FuelEU Maritime will specifically focus on transitioning to low-carbon or renewable fuels, anticipated to take effect after 2025.
Incorporating the maritime sector into the EU ETS represents a major step toward reducing carbon emissions. To thrive in this evolving landscape, it is crucial to formulate a decarbonization strategy now. At ScanOcean, we understand the significance of this transitional phase and stand ready to assist shipping companies in navigating its complexities.
Every regulatory change brings both challenges and opportunities. Our advice to shipping companies is to assess the availability and costs of low-carbon fuels, invest in advance in biofuels and EUAs, and evaluate green investments. The cost of acquiring EUAs should be factored into all business cases regarding fuel consumption and fuel selection.
ScanOcean is committed to supporting you throughout the transition to alternative fuels and offering solutions for EUAs. Our dedicated team can help you meet your emissions reduction targets by providing guidance and the latest information on alternative fuel availability while working closely with you to devise strategies for EUAs procurement.
