What does the Green Deal really mean for shipping?

“We’re – cautiously – optimistic… but it’s a mixed bag,” Lars Robert Pedersen of BIMCO told TMS.

This may be the point: the Green Deal’s challenges and opportunities are designed to both be far reaching and intertwined in a way that’s never before been attempted.

Along with enshrining 2050 climate-neutrality in law and increasing the 2030 target to at least 50% from its current 40%, it’s looking to tighten the European Emissions Trading Scheme, broaden its reach and by the way, close existing tax exemptions for maritime fuels – which is, according to Pedersen, “complex… and a very hot potato for member states”.

Further, alongside the Euro-ETS, the Deal states it wants to “regulate access of the most polluting ships to EU ports and to oblige docked ships to use shore-side electricity”. It’s also ambitious enough to push for phasing out investment in fossil-fuel infrastructure in partner countries using “diplomatic and financial tools”.

However, on the other hand, it’s trying to open what it calls “a sustainable blue economy”.

So, there’s money for clean technology, a pot which could amount to €10 billion. “It’s important to highlight, the shipping sector is eligible for this finance,” said Sam Van den plas, Carbon Market Watch policy director: “For example, fuel cells and renewable, green hydrogen power could be supported through the innovation fund,” largely through EU programmes such as Horizon Europe.

“This is very positive… they’ve recognised shipping is a very efficient form of transport, and want to ramp up sustainable transport fuels. This can really drive our decarbonisation future,” said Pedersen, pointing to the priority put on disseminating green energy infrastructure.

However, there are definitely layers of ambiguity, added Pedersen. For example, while the Deal implies it wants to bring shipping inside the European Emissions Trading Scheme (ETS) by June 2021, “it also says it wants to develop international carbon markets with global partners”, adding for shipping “this means IMO”.

But does the inclusion in the EU ETS compromise potential IMO moves to put a price on shipping’s carbon?

Certainly, back in 2017 IMO Secretary-General Kitack Lim said: “Inclusion of emissions from ships in the EU-ETS significantly risks undermining efforts on a global level.”

But Van den plas disagrees: “It could be compatible with IMO rules, which might take into account the IMO levy or carbon price and subtract it.” He added: “Most importantly, what the European ETS does is establish a floor on carbon pricing and encourage IMO to move forward.”

There are challenges. As the Deal states “the ecological transition will reshape geopolitics, including global economic, trade and security interests”, and it recognises that “as long as many international partners do not share the same ambition as the EU, there is a risk of carbon leakage”.

There may be some consolation for clean shipping companies: the new ‘carbon border adjustment mechanism’ (which aims to level the field against high-carbon, lower-cost imports), will embrace transport, so shipping companies offering a low CO2 footprint should gain European business.

But it will be some time before all this reaches the law books. “We have to remember, this is a policy document not legislation – and there’s a lot that needs working out,” said Pedersen. “What is real, what is pressure, is difficult to ascertain – but still, although there are concerns, we are positive.”