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In world first, EU legislators agree to price shipping emissions

21 December 2022

EU legislators agreed to include maritime transport within the EU’s emission trading scheme (ETS) during talks that lasted until late Tuesday evening (29 November), a move that will force ship operators to pay for their carbon emissions for the first time.

The idea of adding the maritime sector to the EU’s carbon market was first raised a decade ago, but concerns over international competitiveness slowed progress.

The ETS requires polluting industries to pay for each tonne of carbon they emit, with the aim of spurring them to embrace clean solutions.

While it is now a virtual certainty that shipping will have carbon emissions priced, the agreement on the maritime sector was only one part of a wider revision of the ETS. These negotiations will continue, with the next and potentially final talks due to take place on 16-17 December.

According to the European Parliament’s chief negotiator on the file, German lawmaker Peter Liese, the maritime agreement will lead to some 120 million tonnes of carbon savings – double that of the much-publicised EU ban on the sale of polluting vehicles.

Globally, the maritime sector is responsible for around 3% of greenhouse gas emissions. In 2019, more than 144 million tons of CO2 were attributed to maritime shipping.

Hailing the deal as historic, Liese said the legislation will not only reduce carbon, but help to improve air quality in coastal cities.

“Emission trading will force shipping companies to invest in clean technologies, otherwise they will have to pay a huge amount of money,” said Liese who is from the Conservative CDU party of former Chancellor Angela Merkel.

“And I have clear indications that shipping companies will go green – they will decarbonise and clean up their processes,” he added.

Under the deal, ships travelling within the EU will be required to pay for 100% of their emissions, while 50% of the emissions of journeys to or from a non-EU destination will be covered.

The percentage of emissions covered will increase over time, starting at 40% in 2025, moving to 70% in 2026, and reaching 100% by 2027. However, these figures “are in brackets” Liese warned, as they must be confirmed by member states during the next negotiating round.

In a departure from the European Commission’s original proposal, non-CO2 emissions, such as methane and nitrous oxide, will be included from 2026.

Negotiators also secured an earmarking for 20 million CO2 pollution credits, with funds generated by these certificates reinvested into the sector via an innovation fund.

“That will bring billions which are directly reserved, earmarked, for investment in ports and in ships,” Liese told reporters. The fund will also go towards protecting sea creatures.

The legislation will apply to all ships over 5,000 gross tonnes, leaving smaller vessels exempt. This will be reviewed by the European Commission in the coming years to ensure, that companies do not produce “4,999 gross tonne ships to get around the law,” Liese said.

Luxury yachts, typically owned by the super-rich, are exempt from the ETS agreement, though Parliamentarians hope to cover them under future legislation.

Asked whether the agreement will cause conflict with the International Maritime Organisation (IMO), the UN body tasked with regulating shipping, Liese said that he is “optimistic” that it will survive any IMO criticism.

“Of course, we have to fight, we have to defend our position,” said the German lawmaker.

“The world has better understood that climate [change] is urgent. And if international institutions don’t solve the problem, Europe has to do it,” he added.

Jutta Paulus, a German MEP who is shadow rapporteur on the proposal for the Greens, hailed the agreement, saying that the “patience and perseverance” of negotiators were finally “paying off”.

“After two and a half years of intensive negotiations, I am pleased about the inclusion of maritime shipping in European emissions trading and the creation of an innovation fund for more sustainable shipping and the protection of maritime habitats,” she said.

“Climate vandalism on international oceans has come to an end,” she added.

Paulus’s Greens colleague and German compatriot Michael Bloss welcomed the deal, but criticised member states for slowing progress on the ETS revision.

“The negotiations on the largest climate law in Europe are progressing at a snail’s pace,” he said. “Concluding the whole negotiations in two weeks will be extremely difficult if the member states continue to act as brakes in the process.”

The World Shipping Council, a trade association representing the international liner shipping industry, highlighted the need for investment to facilitate the sector’s transition to zero-carbon fuels.

“We are ready, and we hope that the EU ETS for maritime will help drive investment in renewable energy as well as in the supply networks needed for the alternative maritime fuels necessary to make the transition,” said Jim Corbett, the World Shipping Council’s environmental director for Europe.