The EU’s Emissions Trading System (EU ETS) is being expanded to cover shipping. But what does this involve and what does it mean for the maritime sector?
The European Union’s Emissions Trading System (EU ETS) is one of the main tools with which the EU hopes to combat global heating and reduce greenhouse gas (GHG) emissions cost effectively. The EU ETS is meant to apply the ‘polluter pays principle’, meaning that the cost of pollution should be borne by those who create it. The EU ETS covers emissions from electricity and heat generation, energy intensive industries, aviation and, from 2024, shipping.
The EU’s Emissions Trading System for shipping operates in a manner that is impartial to flags and is based on routes. It addresses emissions from maritime transport in the following ways:
- 100% of emissions on voyages departing from and arriving at a port under the jurisdiction of an EU member state
- 50% of emissions on voyages departing from a country outside the EU and arriving at an EU port and 50% of emissions departing from an EU port and arriving in a port located in a non-EU country
The EU ETS for shipping will be phased in starting from 2024. This means that:
- In 2025, shipping companies will have to pay for 40% of their emissions reported in 2024
- In 2026, this will increase to 70% of the emissions reported in 2025
- From 2027, shipping companies will have to pay for 100% of their emissions
he EU ETS will apply to all cargo and passenger ships of 5,000 gross tonnage (GT) and above. In 2027, the EU will decide on whether to expand the scope of the ETS to include offshore ships of 5,000 GT and above, and general cargo ships between 400 GT and 5,000 GT.
The EU ETS for shipping will cover all carbon dioxide (CO2) emissions from 2024 and all methane (CH4) emissions and nitrous oxide (N2O) emissions from 2026.
The shipping company – defined as “the shipowner or any other organisation or person, such as the manager or the bareboat charterer, that has assumed the responsibility for the operation of the ship from the shipowner” – is responsible for paying for the emissions of each affected vessel to the EU member state whose port it calls at.
The EU will support the decarbonisation of shipping through the Innovation Fund, which will receive the revenue of 20 million allowances for use in the sector. The rest of the revenues will go to member states, which will have to spend it only for climate-related purposes.
Yes. Ships travelling on ice will have to pay 5% less until 2030. Voyages towards or between outermost regions of the EU are exempted until 2030, as are voyages from passenger ships and ferries between islands with a population of less than 200,000 and the EU member state to which they belong.
Finally, no fishing vessels, private yachts, service vessels or military vessels will have to pay for their emissions.
