Speeding up shipping’s inclusion to the EU ETS

May 23, 2022

EU Parliament committee suggests a basket of amendments to speed up shipping’s inclusion to the EU Emissions Trading System (ETS). Suggestions include deleting the phase-in period and extending the geographical scope of the scheme while allowing shipowners to pass on the carbon cost to the charterer. This is good news for frontrunners and for the commercial decarbonisation of shipping.

The European Parliament’s environmental committee (ENVI) voted in a meeting last week to speed up the inclusion of shipping to the union’s Emissions Trading System (ETS). The basket of amendments that the environmental committee is serving holds many suggestions, and these are some of the most impactful for charterers and ship owners:

  • Deleting the planned phase-in period for maritime emissions, shipping companies must surrender allowances for 100 % of emissions from start
  • Extending scope to include 100 % of emissions from global EU voyages from 2027
  • Including a binding clause allowing shipowners to pass on the cost of emissions to the charterer
  • Extending scope to cover methane (CH4) and nitrous oxide (N20), not only CO2
  • Extending scope to include ships of 400 gross tonnage and above (5000 GT in the original proposal)
  • Extend scope to include offshore service ships
  • 75 % of shipping’s ETS revenues to be returned to industry funding green research

The inclusion of maritime emissions has the potential to greatly influence freight rates and the new suggestions would further increase the carbon exposure. At the same time, the debates on who should pay the final cost seem to have landed as the ENVI suggests to include a binding clause allowing shipowners to pass on the cost of carbon to the commercial operator.

Good news for frontrunners and for the commercial decarbonisation of shipping

Geir Olafsen who is heading Siglar Carbon's Analytics & Advisory team believes that speeding up the inclusion of shipping will speed up the commercial decarbonisation of the shipping industry, and that commercial decarbonisation is the best way to make short-term and substantial reductions in shipping emissions.

“Going forward, all commercial shipping decisions will include an emissions cost element. This is good news for frontrunners who are already prepared and can start using emissions insight as a competitive advantage, spotting risks and opportunities ahead of their competitors. It is also good news for speeding up the required reduction of maritime emissions.”

The committee’s views are not binding but they provide a guide to the European Parliament's position for final negotiations with the European Commission and member states. The amendments will be voted in the European Parliament in June.

We will post updates on new developments and bring more information on the most important changes.

Shipping's carbon cost could increase fivefold

Factbox ENVI suggestion