SEA TRANSPORT: EU EMISSIONS TRADING SYSTEM

Faced with the challenges of limiting global warming, the European Commission unveiled its European Green Deal in December 2019, with the political ambition of making the European continent carbon neutral by 2050. The transport sector, and shipping in particular, is a major contributor to carbon emissions, and is therefore an integral part of the Green Deal. Measures are being put in place to adapt to the new regulations. This will be followed by the introduction of a carbon tax, calculated on each maritime shipment, as of January 1, 2024.

ACTIONS IN THE SHIPPING SECTOR

Adapting the maritime transport sector to all the measures set out in the “Fit for 55” package (see below) involves bringing maritime fleets into line with the use of ships running on biofuels (LNG – biomethane – e-methane), and in particular the orders for new-generation ships already placed by players in the sector.

The implementation of the EU ETS (Emissions Trading System – see below) from January 1, 2024, will require European shippers to pay a carbon tax based on declared emissions. The ETS will be passed on to each shipment as soon as it is implemented.

Companies are already communicating surcharge amounts, which vary according to shipping line and equipment, and will be re-evaluated regularly (monthly or quarterly, depending on services). It should be noted that all contracts (spot or long-term) are affected by this surcharge.

EUROPEAN GREEN DEAL

The aim of the European Green Pact is to make the continent a pioneer in terms of climate neutrality by 2050, by guaranteeing the end of greenhouse gas emissions by the same date.

Emissions reduction is planned with an intermediate step of reducing greenhouse gas emissions by 55% by 2030, compared with 1990 levels.

In order to meet this first objective, the European Union has drawn up a schedule of mandatory achievements to be met by 2030, known as “Fit for 55“.

The “Fit for 55” package is a set of proposals and initiatives designed to meet the targets set by the EU.

FIT FOR 55

There are fifteen proposals in the “Fit for 55” project, some of which directly concern the transport sector:

ETS: Emissions Trading System. Shipping companies are directly concerned by the cap on emissions allowances, which consists of purchasing and surrendering allowances based on emissions in excess of the cap at the end of each year. This system was introduced in 2005, and has already reduced EU emissions by 41%. It will be reformed and extended to maritime transport as part of “Fit For 55” from January 1, 2024. It will be phased in gradually, with the number of allowances falling each year over the next three years to encourage lower emissions:

• 40% of total declared emissions will be calculated in allowances in 2024
• 70% of total declared emissions will be calculated in allowances in 2025
• 100% of total declared emissions will be calculated in allowances in 2026

All ships calling at an EU port for intra-European voyages, as well as ships docked in EU ports, but also 50% of ship emissions for extra-European voyages, are covered by the EU ETS. The ports of Tanger Med and East Port Saïd are also included in this regulation, as they are less than 550 km from a port under the jurisdiction of an EU member state.

CBAM: The Border Carbon Adjustment Mechanism targets imports of more carbon-intensive products, and aims to extend the EU’s greenhouse gas reduction targets to imports of products manufactured in third countries. It will gradually replace existing EU schemes (see our full article: Import Customs: Border Carbon Adjustment Mechanisms).

FUELEU MARITIME initiative: the aim is to reduce greenhouse gas emission intensity from 2% in 2025 to 80% in 2050, by promoting the use of renewable and low-carbon fuels in maritime transport, excluding fossil fuels from the certification process, and making shore-side power mandatory for container ships from 2030.

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