EU’s proposal that ships be required to buy allowances for CO2 emissions during voyages within the EU is seen as a unilateral move that could undermine IMO’s global shipping greenhouse gas (GHG) emissions strategy
Intertanko managing director Katharina Stanzel said, “Intertanko members noted with great concern the European Parliament’s decision to include both international and EU ’domestic’ shipping trades into their Emissions Trading System (ETS).”
Ms Stanzel added “We have yet to assess the overall consequences of such a measure, but it could seriously undermine the efforts taken by IMO under its strategy to reduce GHG emissions from international shipping”.
The proposal is far reaching as it covers all ships over 5,000 gt trading to EU ports, irrespective of their other destinations. Ships will be required to buy allowances for each tonne of CO2 emitted during the entirety of these voyages.
Intertanko technical director Dragos Rauta said “This proposal would have serious consequences for trade with EU countries, since allowances would need to be purchased for all CO2 emissions reported under the current EU MRV regulation.”
“Based on total CO2 emissions reported to EU MRV Thetis for 2018 (142.5M tonnes) and 2019 (135.7M tonnes) and based on the current price of €25 (US$30) per unit (price for one tonne of CO2 emission), the aggregate cost for ships trading to EU ports could be as high as €3.5Bn (US$4.2Bn) per year, with a heavy load for ships engaged in long voyages,” he added.
The EU’s proposal included establishing an Ocean Fund to collect money from ships. It is suggested that 20% of funds should be used for the “restoration and better management of marine ecosystems”.
It is not known what share will be dedicated to much-needed projects developing and deploying solutions to decarbonise international shipping, as foreseen by the IMO strategy. If this share is small, Intertanko fears the scheme will turn into a carbon tax/offsetting arrangement, which will not really cut emissions from shipping at all.
The current ETS Directive is described as a regional system, however, as reported to the MRV Thetis system, a large proportion of tankers’ trade to the EU is linked to destinations outside the union.
Intertanko noted that the extra costs would also impact on the EU’s trading partners with associated legal and diplomatic concerns about the geographic reach of a unilaterally imposed emissions charge yet to be understood.
Intertanko stated it will continue to investigate and analyse to better understand the results of a possible inclusion of international shipping in the EU ETS and will engage with ports and EU member states for further advice and discussion.
A newly published paper by the World Shipping Council (WSC) has highlighted serious concerns for the maritime trade and global efforts to reduce GHG emissions if the EU expands its Emissions Trading System (ETS) to include international shipping
Shipping in the EU Emissions Trading System (ETS): An Evaluation of Regional Regulations Applied on an Extraterritorial Basis focuses on the geographic scope of the EU ETS.
With the European Parliament’s vote for the inclusion of GHG emissions from ships over 5,000 gt in the EU ETS by 1 January 2022, the most-discussed geographic application of the EU ETS to shipping is to mirror the scope of existing EU legislation on monitoring, reporting and verification (MRV) of carbon emissions.
Far from the EU ETS being a ’regional’ system, the paper argues that by bringing international shipping into this system using the MRV scope, the EU would establish an “unprecedented degree of control over extraterritorial voyages”, including on the high seas and in waters adjacent to non-EU nations.
WSC said the European Commission must first address the question of the geographic scope of any ETS system for shipping before turning to the technical details in the creation of such a system. If the geographic scope is the same as the MRV GHG reporting regime, the system would also cover cargo volumes that are not part of EU trade but are transhipped through EU ports.
Further, the paper argues that shipping may come to bear the brundt of a huge proportion of ETS revenues. While the CO2 allocations for shipping are as yet unknown, WSC used a hypothetical carbon price of €25 (US$30) per tonne for CO2 generated in 2018. By this calculation, the ETS would impose trade costs of roughly €3.45Bn (US$4.06Bn) in a single year on shipping, representing 25% of the total 2018 ETS revenues being generated by the sector.
WSC president and chief executive John Butler said “If the current MRV geographic scope is used, a majority of the emissions covered by the system would occur outside EU waters, in many cases from voyages extending thousands of miles across the globe,” adding that the EU would be “well advised to avoid extraterritorial application of the ETS.”
This may include a further tariff on less-developed countries simply because their goods are routed through the EU. A charge would be levied first on the cargo as it sails into an EU port and then again as the same cargo leaves the EU on another vessel to its ultimate destination.
Mr Butler said the affected cargo may create trade tensions between the EU and its trading partners and raise legal and diplomatic concerns about the geographic reach of a unilaterally imposed emissions charge.
Further, WSC believes the tensions and disruptions caused by an EU ETS with extraterritorial effect would harm the prospects for a global GHG reduction solution implemented through IMO.
Mr Butler said “It is unlikely that a government that has set up its own revenue-generating emissions system will dismantle it in favour of a global one,” concluding that if the EU wants to lead the effort to decarbonise shipping, “that leadership needs to be channelled through IMO, which is the only place where a global solution can be reached.”
The WSC represents the interests of the international liner shipping industry. The paper can be found here.