EU emissions trading system to impact shipping industry

Ships to incur emissions costs starting January

{reg}In January, ships trading with the European Union will enter the EU Emissions Trading System, incurring substantial emissions charges. This measure aims to address the emissions issue of ships, responsible for over 80 percent of global trade emissions.

Major shipping firms like MSC Mediterranean Shipping Company SA and A.P. Moller-Maersk A/S could face emissions costs in the hundreds of millions of dollars, but these charges may not immediately drive a shift to cleaner marine fuels due to their relative size compared to overall shipping expenses.

While the EU Emissions Trading System will increase freight rates, industry experts suggest that vessel supply and demand will have a more significant impact on shipping costs.

For instance, a container ship on the Europe-Asia route could face emissions costs of about EUR 810,000 (USD 864,500) in the first year, assuming a EUR 90 per ton carbon market price. Costs are set to rise as more emissions must be covered. The regulation applies to ships weighing 5,000 gross tons or more traveling to and from EU and European Economic Area ports.

While the program may not immediately reduce emissions, it encourages shippers to enhance fuel efficiency. Additionally, as the number of emissions allowances decreases, carbon prices are expected to rise, making the system more effective. Future plans include incorporating methane and nitrous oxide emissions from shipping.

The EU will also introduce the FuelEU Maritime regulation in 2025, setting maximum limits on the annual greenhouse gas intensity of vessel energy usage, further promoting cleaner fuels over time.[/reg]