EU Parliament wants to include shipping emissions in the EU ETS

To incentivise industries to further reduce their emissions and invest in low-carbon technologies, the Emissions Trading System (EU ETS) should be reformed and its scope enlarged, Members of the European Parliament said.

Illustration. Courtesy of Navingo
Illustration. Courtesy of Navingo

On 22 June, the European Parliament adopted its position on the revision of the EU ETS. This followed a plenary debate on 7 June.

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To remind, the ETS is part of the “Fit for 55 in 2030 package”, which is the EU’s plan to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels in line with the European Climate Law.

MEPs believe that the ETS is at the core of European climate policy and has triggered significant reductions in emissions, as putting a price on greenhouse gas (GHG) emissions has given economic actors an incentive to reduce their emissions and invest in low-carbon technologies.

EU ETS extended to maritime transport

The ETS would now be extended to maritime transport, as requested several times in the past.

Specifically, MEPs want to cover 100% of emissions from intra-European routes as of 2024 and 50% of emissions from extra-European routes from and to the EU as of 2024 until the end of 2026.

From 2027, emissions from all trips should be covered 100% with possible derogations for non-EU countries where coverage could be reduced to 50% subject to certain conditions.

MEPs also want GHG emissions other than CO2 to be included, such as methane nitrous oxides.

75% of the revenues generated from auctioning maritime allowances shall be put into an Ocean Fund to support the transition to an energy-efficient and climate-resilient EU maritime sector.

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ECSA: This is a strong signal that the maritime sector is being heard in the EU

European shipowners represented by the European Community Shipowners’ Association (ECSA) have welcomed the strong cross-party support by the plenary of the European Parliament for key provisions under the revised Emission Trading System for shipping.

A key element of the Parliament’s position is the enforcement of the ‘polluter-pays’ principle, by ensuring the mandatory pass-through of the ETS costs to the commercial operators of the vessels through contractual clauses.

Source: ECSA

ECSA said it also welcomes 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.

European shipowners welcome the increased climate ambition of the ‘Fit for 55’ package. We have criticised the lack of consistency and have put forward workable solutions. The Parliament’s vote is a strong signal that the European policy-makers listen to us and take into account the proposals of our sector,” Sotiris Raptis, ECSA’s Secretary General, commented.

We need all hands on deck and the role of the commercial operators is key for reducing emissions. The earmarking of the revenues to shipping is a prerequisite for financing the uptake of cleaner fuels. It’s a make-or-break moment for the decarbonisation of shipping and the competitiveness of the sector.”

ESPO: Avoiding carbon and business leakage is key for ETS to be effective

The European Sea Ports Organisation (ESPO) has also welcomed the EP position that outlines an ambitious and robust ETS that includes measures to address, and if possible, avoid carbon and business leakage.

ESPO has also welcomed that the EP position includes earmarking of revenues for investments in ports and maritime.

In order for a regional ETS in the EU to be effective and aligned with the polluter pays principle, carbon leakage through rerouting of ships outside of the ETS scope must be avoided at all costs. If this is not addressed in the final legislation, the ETS would fail to effectively reduce emissions from ships whilst also producing a negative impact on the European port business, according to ESPO.

European ports therefore strongly support the measures adopted by European Parliament making it less attractive for ships to change their routes, divert calls, or engage in other evasive behaviours in order to avoid paying into the EU ETS. ESPO believes that the EP position provides a good basis to address carbon and business leakage in the ETS. The preventative measures included in the EP position should be included in the final ETS to be agreed between European Parliament and EU Member States.

ESPO, therefore, calls on EU Member States in the Council to closely consider the EP position and to address carbon and business leakage in their general approach to be agreed on 28 June.

“The EP position on EU ETS contains many of the key elements for an ambitious and effective maritime emission trading system. We very much welcome the willingness of the Parliament to address the risk of carbon and business leakage, which would undermine the climate goals whilst damaging the competitiveness of the EU port sector. We hope that EU Member States take these measures onboard in their general approach as part of finding a solution to this issue. Some further fine-tuning might be needed but all the necessary elements for a solution is now on the table,” Isabelle Ryckbost, ESPO Secretary General, said.

More work is needed to ensure that the maritime EU ETS delivers the greening of shipping, whilst safeguarding the competitiveness of the European maritime sector and ports. European ports look forward to helping policymakers find solutions to the issue of carbon and business leakage to deliver an effective maritime ETS.