Stakeholders welcomed parliamentary approval of legislation taking shipping into the European Union’s Emissions Trading System (ETS) as a victory that brings long-sought certainty.

The European Community Shipowners’ Associations (ECSA) said that earmarking €2bn ($2.19bn) in revenue from the measure for a maritime-focused fund could mark a turning point for decarbonisation by fostering clean fuels uptake and innovation.

ECSA secretary general Sotiris Raptis said the EU Innovation Fund support is key to bridging the price gap between conventional bunker oil and more expensive clean fuels.

“Addressing the climate crisis and decarbonising shipping is not a question of ‘if’ but a question of ‘how’,” he said.

“Setting aside part of the ETS revenues for maritime is a victory for the energy transition of the sector.”

ECSA also welcomed that the language of the final bill upholds the “polluter pays principle” by requiring costs to be passed on to vessels’ commercial operators.

And it said that phasing in the rules, which enter into force in 2024 once finalised, is crucial to ensuring a smooth transition for shipping.

The EU triumvirate of key institutions — the European Commission, Parliament and Council — agreed late last year to fold shipping into the ETS in phases between 2024 and 2027.

Last key hurdle

But approval of the details by the European Parliament was a key remaining hurdle, although some steps remain before finalisation.

Valentina Keys, a UK-based environmental lawyer at Watson Farley & Williams, said parliamentary approval of the new emissions trading law sends “a strong signal of certainty” to the industry.

Members of the European Parliament discuss the revisions to the ETS. The revisions include shipping starting in 2024. Photo: EU

“The polluter pays principle beacons a completely new era for maritime,” she wrote on LinkedIn.

Folding maritime into EU emissions trading will require shipowners and operators to buy carbon allowances for European voyages in 2024 and beyond.

Buying carbon credits

For 2025, they will have to buy rights for 40% of verified emissions reported in the previous year. In 2026, the percentage rises to 70% and from 2027 all emissions will be covered. Voyages to or from a point outside the EU receive a 50% discount.

“This is a significant step towards reducing the carbon footprint of the shipping industry, which is currently responsible for around 3% of global greenhouse gas emissions,” said SailPlan chief executive Jacob Ruytenbeek, whose clean-tech company offers emissions monitoring to shipping.

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The emissions trading approval is part of a broader legislative drive in Brussels, with the Fit for 55 package including the FuelEU Maritime law aimed at fostering green fuels.

When it is finalised, as expected, it will mark the first time shipping is required to pay a price for its GHG emissions at a time when the International Maritime Organization is still debating global market-based measures, such as a carbon levy.

But questions remain about how it will be applied.

Irina Haesler, a board member of the German Shipowners’ Association (VDR), said: “German shipowners fully support this fundamental legislation that drives the decarbonisation of shipping while maintaining the competitiveness of the sector through the earmarking of revenues of the EU Innovation Fund.

“However, it is now up to the 27 EU members states to implement the directive in the same way in order to avoid loopholes and different interpretations.”


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