A common sense EU ETS revision that could jump-start decarbonisation

The proposal by Brussels calls for revenues collected from the maritime sector under the cap-and-trade system to be used to close the price gap between expensive low- and zero-carbon fuels and conventional marine fuels. Monies would also support investment in alternative fuel production and availability in Europe.

“We’ll be channelling a lot more money back into the sector - about €15 (US$17.1Bn) billion a year, which is roughly eight times the current level,” said Wopke Hoekstra, European commissioner for Climate, Net Zero and Clean Growth, during a press conference. “We will also give the maritime industry a solid push to get its decarbonisation efforts off the ground with support for sustainable maritime fuel. In turn, this will help to establish a pan-European market for refining these fuels.”

Shipowners and operators hailed the common sense revision. European Shipowners (ECSA) called the earmarking of ETS revenues for the uptake and production of alternative fuels at the EU and national level “a long-awaited and important step in the right direction.”

ECSA, which represents the interests of 21 member associations in Europe and Norway, said the support was “necessary” to make the sustainable fuels available at the European and global level. It said the proposal would make 110 million European Union Allowances (EUAs) available to the shipping sector, amounting to approximately €10Bn (US$11.4Bn). EUAs allow a company to emit 1 tonne of CO2 under the cap-and-trade system. At national level, 50% of Member States’ ETS revenues are earmarked, with shipping decarbonisation among the priority purposes.

“A long-awaited and important step in the right direction”

“Liner shipping has already invested over €160Bn (US$183Bn) in ships that can operate on renewable fuels, but these cleaner ships need cleaner fuels,” observed World Shipping Council (WSC) vice president, Environment and Climate, Simon Bergulf. “Closing the price gap is one of the most practical ways to get those fuels in ships’ tanks.” The WSC represents global container shipping and the vehicle carrier industry.

One WSC member investing in alternative fuel-capable ships is Wallenius Wilhelmsen. In July, it added Arctic Tern, the first of 14 new pure car truck carriers (PCTCs) with methanol dual-fuel capability. It conducted the first bunkering of green methanol at the Port of Shanghai. The green methanol supplied was produced from municipal solid waste, ISCC-EU certified, and had a carbon intensity value below 25 gCO2e/MJ. By contrast, the carbon intensity value of marine gas oil on a well-to-wake basis is significantly higher – typically between 90 and 95 gCO2e/MJ.

Xavier Leroi, COO Shipping Services at Wallenius Wilhelmsen and CEO of EUKOR Car Carriers, said the bunkering operation demonstrated “how investments in next-generation vessel technology and fuel flexibility are being translated into real-world operation.”

But investments in newbuildings capable of using alternative fuels other than LNG and LPG stalled in the first half of this year, in no small part due to the uncertainty hanging over the adoption of the IMO’s previously agreed Net-Zero Framework (NZF).

Reducing the price gap between alternative fuels and traditional bunker fuels is a common-sense approach to reducing the risk and uncertainty around investment in alternative-fuelled ships, and sends a stronger signal to low-carbon fuel producers that the industry is “open for business”.