EU commits to “polluter-pays” principle for ETS

ECSA also voiced support for the proposal of the Parliament to create a sector-dedicated fund and to earmark 75% of the revenues generated by the shipping allowances to the energy transition of the sector.

“Although our first preference has always been an international regulation for shipping at the IMO level, European shipowners recognise that the sector should contribute its fair share to address the climate crisis at the EU level as well. The mandatory pass-through of the ETS costs to the entities responsible for operational decisions will ensure the proper implementation of the polluter-pays principle. Although the position of the Parliament needs to be improved on certain points, it is a significant step forward,” said Philippos Philis, ECSA’s President.

“The earmarking of the revenues is essential to finance R&D projects and to bridge the price gap between cleaner and conventional fuels. 80% of the current ETS revenues are used for the energy transition of the European economy, and we want to see the same happening for shipping. It’s a make-or-break moment for the decarbonisation of shipping and the competitiveness of the sector,” said Sotiris Raptis, ECSA’s Secretary-General.

Transport & Environment (T&E) has also welcomed the decision but warns that exemptions for ice-class (ships that travel through ice) vessels and voyages to outermost regions would undermine its effectiveness.

Jacob Armstrong, sustainable shipping officer at T&E, said: “Shipping’s right to pollute for free is finally coming to an end. The ENVI Committee has proposed a climate-ambitious carbon market that works for industry and for the climate. The European Parliament Plenary must now rubber stamp this proposal so that we can start to take advantage of the ETS revenues and begin shipping’s long-delayed voyage towards decarbonisation.”

The World Shipping Council (WSC) was more cautious about the change, stating that all parties that can influence the design and operation of ships should share the EU ETS costs. “A faster transition to zero carbon in the shipping sector will be achieved through shared motivations to drive change. Vessel owners and operators currently operate with shared responsibility across a range of areas through mutual contracts. There is no reason to believe that the freedom of contract system that works globally would not work for the EU ETS. Owners and operators share responsibility for bringing down GHG emissions in shipping, and completely excluding one entity will not lead to the needed investments in new engines and fuel types.”

Additionally, WSC raised the following issues:

• The design of the EU ETS needs to take into account the life-cycle emissions of renewable and low-carbon fuels in order to incentivise first-mover action. The lack of a life-cycle emissions approach risks diverting investments away from solutions that require low-GHG fuel production and supply to enable innovative technologies onboard. Moreover, an EU ETS that ignores life-cycle accounting may even reward the production of fuels (in Europe or abroad) with a very heavy well to tank footprint, potentially leading to increased GHG emissions.
• Reconsider the misconception that a broader geographical scope is equal to higher ambition. Intra-EU scope for maritime avoids carbon leakage and the concerns about the loss of competition for EU ports. With multiple proposals on the table at the IMO, it is crucial not to create additional barriers to a global agreement. Moreover, there are no risks for international trade distortions or retaliatory measures from third countries with an intra-EU scope.

The ETS will go to the Plenary between 6 June and 9 June before going to Trilogue negotiations with the EU Council and European Commission.