May 28, 2021
A large majority of the respondents in an EU public consultation wants to include emissions not only from voyages between EU-ports but also from voyages between EU and non-EU ports in the Emissions Trading System (ETS).
In line with the European Green Deal communication, the Commission is assessing carbon pricing options to ensure that the price of maritime transport reflects the impact it has on climate. In addition, the Commission has announced that it will consider including at least intra-EU maritime transport in the EU ETS, to ensure the sector contributes to the emissions reductions needed.
The presentation of how the EU plans to include the maritime industry in the EU ETS is postponed until July, and many questions are still pending. Some of them were raised in a public consultation quationnaire on updating the EU ETS. The questionnaire states that the environmental effectiveness of EU carbon pricing for the maritime sector, will directly depend on selected design elements. Among other design options respondents are asked to select the most appropriate geographical scope for EU carbon pricing policy for maritime transport. The options are:
In the consultation a large majority wants to include emissions not only from the intra-EU voyages but also from the extra-EU voyages in a carbon pricing scheme.
161 respondents answer that both intra- and extra-EU voyages should be included, whereas 55 respondents want to include only the intra-EU voyages. The respondents to this question are mostly companies and business organisations, citizens, NGOs and some public authorities. Most ship owners' associations want to include both intra and extra voyages.
Stakeholders who want the bigger scope included in the ETS argue that it would more than double the number of emissions covered, not only bringing more actors into the scheme, and potentially reduce more emissions, but it would also stimulate the financing of the green transition of the maritime industry.
The main arguments for leaving the extra-EU voyages out of the scheme is that it would complicate the legal and administrative implementation, and that it could negatively impact international trading and complicate global initiatives to reduce emissions from the maritime sector.
The maritime sector is the only sector that is not yet covered by EU actions to reduce emissions. The ETS is a key instrument for the EU to reduce greenhouse gas emissions and including shipping in the scheme is important to achieve both the union’s 2050 climate-neutrality target and the proposed net greenhouse gas emissions reduction target of at least 55% by 2030.
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The EU Emissions Trading System
The EU ETS works on the 'cap and trade' principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by the installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, installations buy or receive emissions allowances, which they can trade with one another as needed. The limit on the total number of allowances available ensures that they have a value.
The number of emissions trading systems around the world is increasing, and the EU ETS is inspiring many of the developments. National or sub-national systems are already operating or under development in e.g. Canada, China, Japan, New Zealand, South Korea, Switzerland and the United States. The EU aims to link the EU ETS with other compatible systems.
The price of EU allowances (EUAs, 1 allowance equals 1 tonne of carbon dioxide (CO2) or its equivalent) has increased by approx. 50% since the European Union leaders in December agreed on the more ambitious emissions reduction target for 2030. At the time of writing this article an EUA is traded at 52,22 euros per EUA, and most analytics expect the price to increase further. You can follow the daily EU ETS carbon spot market price on EEX market data.