EU to ringfence some ETS funds for shipping

The European Parliament, the Council of Ministers and the European Commission agreed on how to include maritime emissions in the EU ETS during a meeting between the three bodies on Tuesday. The provisional agreement is subject to an overall agreement on the ETS revision in late December.

“Setting aside part of the ETS revenues for maritime is a victory for the decarbonisation of the sector,” says Sotiris Raptis, European Shipowners’ (ECSA’s) Secretary General. ECSA also welcomes the upholding of the “polluter-pays principle” through mandatory requirements for the pass-through of the EU ETS costs to the commercial operators of the vessels.

German Shipowners (VDR) also welcomed the provisional agreement, noting that international market-based measures from the IMO would have been preferable. “We welcome the fact that the long phase of uncertainty about the concrete design of the EU emissions trading scheme and its application to maritime transport has now come to an end,” says CEO Dr. Martin Kröger.

The co-legislators agreed on special provisions for ice-class vessels, small islands and outermost regions, and the regulations now cover offshore vessels of 5,000gt and over.

The phase-in, starting from January 2024, will see shipping companies pay allowances that cover 40% of their emissions in 2024, 70% in 2025 and 100% in 2026.

The agreement includes all GHGs and outlines steps towards a life cycle perspective. Developing a life cycle perspective on the pricing of ETS allowances would reflect not only fuel emissions when consumed but also GHG emissions from marine fuel production.

“Including all GHGs – CO2, methane and nitrous oxide – in the EU ETS is an important step. But only when the EU ETS takes a full life cycle perspective will it reach its real potential, increasing the competitiveness of truly renewable fuels. A correct price signal is the key to driving investment in the green energy necessary to produce sustainable fuels. With the agreed phase-in, there is a window of opportunity to move forward with a rapid adoption of life-cycle perspectives. This will also align the EU ETS with FuelEU requirements, promoting the uptake of new fuels,” says Jim Corbett, the World Shipping Council’s (WSC) Environmental Director for Europe.

The new regulations cover trips inside the EU and also trips from EU port to third countries and for third countries to EU port (50%).

EU’s private port organisation, FEPORT, has warned that this risks cargo diversion to the advantage of non-EU ports, but members have welcomed the EU’s proposed measures to address this concern, reiterating their call that the EU Commission continuously monitors impacts regarding carbon leakage as well as cargo diversion at the expense of EU ports.