On 16 September 2020, the European Parliament voted to include shipping in the EU Emissions Trading Systsem (ETS) and to set binding requirements for shipping companies to reduce their CO2 emissions by a minimum of 40% by 2030.
According to Members, the Commission’s initial proposal to revise EU rules on CO2 emissions and fuel consumption was not ambitious enough to bring it into line with global rules due to the urgent need to decarbonise all sectors of the economy.
The Parliament reiterated the need for significant CO2 reductions from the shipping industry and its inclusion in the EU ETS. Parliament also stressed the importance of looking at the impact on competitiveness, jobs, and the risk of carbon leakage.
Until now, there has been no requirement in the EU for shipping companies to reduce their CO2 emissions. The maritime transport industry remains the only sector where there are no specific EU commitments to reduce greenhouse gas emissions. Global shipping emits significant amounts of greenhouse gas emissions, with about 90% of world trade transported by sea, global shipping accounts for nearly 3% of the world’s CO2 emissions.
The European Parliament, Commission and Member States yesterday achieved consensus on including shipping in the EU Emissions Trading System (ETS), with the provisional agreement including a landmark decision to allocate ETS revenues for maritime projects to an Innovation Fund.
The ETS will be phased in over a three-year period, with operators surrendering 40% of verified emissions in 2024, 70% in 2025 and 100% in 2026. This is a faster implementation period than earlier versions of the proposals had suggested. The ETS will include vessels of 5,000 GT and above and will apply to 100% of intra-EU voyages, and 50% of voyages between the EU and the rest of the world. Methane and nitrous oxide emissions are also on the slate for inclusion in the scheme, after CO2 emissions.
The European Community Shipowners’ Associations (ECSA) moved swiftly to welcome the provisional deal on shipping, which is subject to an overall agreement on the ETS revision in late December. ECSA highlighted the earmarking of ETS revenues to advance shipping’s decarbonisation as an important milestone. At least 20 million ETS allowances, which equates to €1.5 billion under the current ETS carbon price, will be channelled into maritime decarbonisation initiatives under the auspices of an Innovation Fund.
KIMO welcomes the fact that the ‘polluter-pays principle’ has also been included in the text of the deal, through mandatory requirements for the passing on of the EU ETS costs to the commercial operators of the vessels – so charterers as well as owners.
The provisional deal represents an important turning point for the decarbonisation of the shipping industry which until now has been given a free pass by national policymakers. If the current deal is passed in December it will present a big win for the environment, covering as it does offshore vessels, all greenhouse gases and funding for green shipping. Shipping’s decarbonisation starts here and now.