EU emission scheme will drive up shipping costs

The European Union is expanding its Emissions Trading System (ETS) and the shipping industry could be liable for €3.1bn in 2024, €5.7bn in 2025 and €8.4bn in 2026, with container shipping potentially accounting for 30% of overall emissions.

As part of its drive to net zero emissions by 2050, the EU is expanding its Emissions Trading System (ETS) to the shipping sector from the 1st January 2024, which means container shipping lines will need to purchase emission allowances while investing in alternative fuels, with the increased costs likely to be passed on to shippers.

ETS is a ‘cap and trade’ scheme where a limit (the cap) is placed on the amount to emit specified pollutants, with each shipping lines holding an allowance for each tonne of CO2 or other carbon equivalent gases they emit.

There will be no set price list for these emission allowances, with the price defined by supply and demand on the market and as supply of these emission allowances will gradually be reduced, the allowances will be increasingly costly, to increase pressure on shipping lines to accelerate efforts to reduce their environmental footprint.

ETS will include 100% of emissions for voyages within the EU, 50% of the emissions from voyages starting or ending outside of the EU, and all emissions that occur when ships are at berth in EU ports.

The UK has notified that they will eventually introduce a similar system which would have an impact both on UK domestic routes and UK-EU routes.

Total EU ETS-applicable emissions for the maritime industry amounted to 83.4m metric tonnes of CO2 equivalent which, at the current market value of €90 per emissions allowance (EUA), represents a total shipping emissions bill of €7.5bn for the year.

With ETS being phased, the shipping industry would be liable for 40% of emissions in 2024, 70% in 2025 and 100% in 2026. This translates into a liability of €3.1bn in 2024, €5.7bn in 2025 and €8.4bn in 2026, with container shipping potentially accounting for 30% of overall emissions.

There are still many unknowns relating to the EU ETS and what its cost impact might be, which is why we will keep you informed of important developments and work to mitigate its impact on our customers.

Through our N-CAP initiative, Noatum Logistics is reducing, measuring and offsetting eCommerce emissions.

N-CAP is under continuous development, with regular updates, including distance calculators, which may be adapted to measure liabilities under the new EU ETS regime.

N-CAP modelling tools calculate the carbon footprint to and from any global point, by any mode, or modes, of transport, for any product. We use N-CAP tools to design sustainable supply chains, that reduce costs and carbon emissions, with modal shifts, reduced distances and better utilisation of transportation assets.

To request an N-CAP demo or to discuss any of the issues raised here, please EMAIL Matt Fullard.