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Two versions of the EU ETS - see the different impact on freight rates

There are currently two suggested versions of how the maritime sector should be included in the EU ETS. We compare the two versions to demonstrate how each of them would the impact freight rates.
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Two versions of the EU ETS - see the different impact on freight rates

February 28, 2022

There are currently two suggested versions of how the maritime sector should be included in the EU ETS. We compare the two versions to demonstrate how each of them would the impact freight rates.

UPDATE: This blog describes a suggestion from the European Parliament’s rapporteur on the proposed revision, Peter Liese, in January 2022. On May 18 the EU Parliament's environmental committee (ENVI) voted for further amendments to speed up shipping's inclusion to the ETS. Here are some the most important suggestions.

When the European Commission presented the “Fit for 55” package in July 2021, including the maritime sector in the European Emissions Trading System (ETS) was one of the measures suggested to decarbonise the maritime industry. The ETS suggestion that the Commission presented in July has the potential to greatly influence freight rates. It is currently being processed in the EU and new suggestions made by the European Parliament’s rapporteur Peter Liese could influence the rates even more.

Below we compare the EU Commission’s current version to the new suggestions made by Liese and demonstrate the different carbon cost impact of the the two versions.

illustration EU cost

Illustration EU Cost

If the new suggestions are implemented, it would result in a substantially higher carbon cost of both internal and global EU voyages. Liese's suggested acceleration of the phase-in period could make freight rates of an MR NY-Antwerp increase by USD 82 500 in 2025. According to the Commission's current suggestion they would reach the same level in 2026. If the suggestion to include 100% of emissions from global EU voyages is implemented the carbon cost could reach USD 157 500 in 2029.

The Liese suggestions that would influence the maritime carbon cost the most

  • Accelerated phase-in with full reporting in 2025
    Under the current proposal shipping would be incorporated into the EU ETS from 2023, with a phase-in period ending in 2026. The shipping companies would have to surrender 20 % of verified emissions for 2023, 45 % for 2024, 70 % for 2025 and 100 % for 2026. Liese’s draft calls for an acceleration of the phase-in period recommending that shipping companies report on 33.3 % of verified emissions for 2023, 66.6 % for 2024 and 100 % for 2025 and each year thereafter.
  • 100 % of emissions from global EU voyages included in the EU ETS
    Under the current proposal only 50 % of emissions from incoming and outgoing global EU voyages are included in the scheme. The new draft from the EU Parliament’s rapporteur suggests that if there has been insufficient progress at IMO level by 2028 the Commission should have the option of extending the ETS to cover 100 % of the emissions from ships performing global EU voyages.

More about Liese's suggestion.

The calculations

The carbon price is based on the average February 2022 settlement price of the European Emission Allowances February in the EEX spot market (90,73 EUR) and on a EUR/USD exchange rate of 1.13.

Emissions are calculated using The Siglar Carbon Estimator.

Emissions from the internal EU voyage example is based on a modern MR vessel (max 5 years) loading 37000 tonnes of gasoline in Riga, discharging in Amsterdam, ballasting from Le Havre. It includes emissions from ballast leg, laden leg and port stay in Riga (2 days) and Amsterdam (2 days).  Total and eligible emissions from entire voyage: 700 tonnes of CO2.

Emissions from the extra-EU voyage example is based on a modern MR vessel (max 5 years) loading 37000 tonnes of gasoline in Antwerp, discharging in New York, ballasting from NY. Total emissions include emissions from ballast leg, laden leg and port stay in Antwerp (2 days) and New York (3 days). Emissions from loading and discharge in non-EU ports are not eligible for EU ETS. Total emissions from entire voyage: 1700 tonnes of CO2. Eligible emission from voyage: 800 tonnes of CO2 in 2026, 1550 tonnes of CO2 in 2029.

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