November 25, 2021
At today's rate a fully implemented EU Emissions Trading System would add a carbon cost of more than USD 70 000 per round voyage for a commonly traded intra-EU route. The EU carbon price is increasing, and we give you an overview of the costs that the introduction of the system could bring to two commonly traded shipping routes.
The price of the EU Emissions Trading System (EU ETS) allowances has seen a steep rise lately, adding almost 16% since the end of the COP26 meeting less than two weeks ago. At close of business yesterday the spot allowances were settled at 72,90 euros. One EU ETS allowance represents one tonne of carbon dioxide equivalent.
The continuously rising prices of the EU ETS allowances and the expected inclusion of shipping into the EU trading scheme has created a need to understand the financial exposure related to shipping. Below we use updated EU ETS rates to estimate the carbon price of two commonly traded shipping routes, one intra-EU and one extra-EU, as the trading scheme will be phased in during 2023-2026.
As the EU announced their Fit for 55 package on 14th of July, we examined the different proposed measures to cut maritime emissions and wrote an article about how Carbon cost enters the maritime everyday business. As the inclusion of shipping in the EU ETS is the measure with the largest immediate economic impact on the maritime industry we explained in more detail how the EU ETS could impact the example voyages. The price of the EU ETS allowances was at the time 56,69 euros.
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Want to know more about the outcomes of the 76th MEPC meeting? We've got an article for you:
The IMO adopts operational emission reduction measures despite strong criticism
If you're interested in information on other international decarbonisation regulations and initiatives read on:
What does COP26 outcomes mean for shipping?