Shipping to join EU’s emissions trading market from 2022

Shipping to join EU’s emissions trading market from 2022

The maritime sector’s greenhouse gas emissions will be brought into the regional carbon market over the next two years. Photo credit: Shutterstock.com.

The European Parliament narrowly adopted a resolution Monday to include shipping in Europe’s emissions trading system (ETS) from 2022, bringing the maritime sector’s greenhouse gas (GHG) emissions into the regional carbon market.

After a close vote by lawmakers Monday — 354 votes in favor, 328 against, and 13 abstentions — the ETS will apply to maritime transport from Jan. 1, 2022.

But the drawn-out process that has been under discussion for years is not over yet. The European Commission will now engage in an impact assessment of the ruling by Dec. 31 and consult with member states to work out the final shape of the legislation, which revises the EU system for monitoring, reporting, and verifying carbon dioxide (CO2) emissions from maritime transport (the MRV regulation). It will require a phased-in 40 percent reduction in CO2 emissions by 2030.

While the latest move has been applauded by environmental organizations that point to the shipping sector emitting about 13 percent of Europe’s annual GHG, it is strongly opposed by the shipping sector that argues its GHG emissions regulations should be seen from a global perspective and handled by the International Maritime Organization (IMO). 

That’s the position of the World Shipping Council that represents the container shipping industry, with its president and CEO John Butler noting in a JOC.com commentary this week that the ETS applies to voyages that begin outside the European Union where most of the emissions occur, and that it will simply add costs to shipping that cannot switch to lower-carbon fuel.

The WSC and seven partners in December submitted a proposal to the IMO to establish the International Maritime Research and Development Board (IMRB), with core funding of about $5 billion coming from shipping companies across the world over a 10-year period to identify the zero-carbon fuel of the future. 

“It is not a carbon pricing mechanism, and it has a very different purpose and structure than the EU’s ETS,” Butler said in the JOC.com commentary. “Carbon pricing works on the theory that making a particular behavior — in this case emitting carbon — more expensive will incentivize the adoption of an alternative behavior — emitting less carbon or no carbon. In order for a carbon pricing mechanism to work, there must be an available alternative to which the party paying the price can switch. Otherwise the mechanism adds cost but does not reduce emissions.”

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.