In the EU, shipping accounts for 13.5% of all European Union greenhouse gas (GHG) emissions from transportation. For too long the maritime sector has not been covered by any EU climate policy instrument, however. The revision of the European emissions trading system (ETS) will change that. On July 14, the European Commission proposed to extend the EU’s effective carbon pricing tool to the maritime sector as part of its Fit for 55 package. By this, maritime traffic will finally play in its part in the decarbonisation of the EU’s transport sector.
International shipping is a large and so far untackled source of greenhouse gas emissions. Around the world, it is responsible for 940 million tonnes of CO2 each year corresponding to 2.5% of global greenhouse emissions. As if this was not motivation enough, the emission numbers from this sector are still growing. Without further actions, IMO studies expect a dramatic increase of emissions from maritime transport between 50% and 250% in 2050. That is entirely contrary to all our efforts in the EU so far to reach climate neutrality. Therefore, it is more than obvious that the maritime sector has to finally cut emissions and contribute its fair share to the decarbonisation of Europe.
The inclusion of the maritime sector in the ETS is necessary to achieve the ambitious climate targets. The European Parliament has emphasized this necessity for many years and urged the Commission repeatedly to finally put a proposal on the table.
It is unfair that all parts of the economy and the transport sector are subject to ambitious standards but the maritime industry is not really contributing. In addition, carbon pricing only works flawlessly if the coverage is seamless. Introducing maritime transport into the ETS hence will strengthen the whole system.
In the past years, the EU has put in place EU-wide data collection measures (MRV) as a first step. On this basis, the Commission has now proposed to set up a route-based ETS. This means it will be independent from the ownership and the flag of a ship. Instead, it will be subject to the ETS if it starts or arrives in a European port. This is a very important detail because it will prevent companies from avoiding the carbon price by simply putting a non-EU flag on their ship.
As there have been no climate measures in place so far, there is a great and so far untouched potential to pluck the low hanging fruits in this sector and achieve significant cost-efficient achievements on the way to climate neutrality. By introducing all sectors of the transport sector into the ETS, we will additionally create a level-playing field. This will ensure that the least polluting means of transportation will become the cheapest means of transportation. Through market-based measures, we can consequently accelerate the EU’s transition to green mobility making it clean while keeping it affordable.
The challenge however is to regulate the system in such a way that EU shipping companies and EU ports will not suffer a serious disadvantage.
We must respect the competitiveness of the EU ports and the EU shipping industry. An important tool will be the generated revenues. In the past, the Parliament has demanded to set up a dedicated Ocean Fund.
Creating targeted funds for the shipping industry is important to accelerate the innovation of ships and fuels. The introduction of Contracts for Difference will give further incentives to invest in greening this sector and the industry behind it.
On top of intra-EU shipping, the Commission intends to cover 50% of emissions from trips from and to third countries. In fact, this is a good compromise with the international partners. Of course, a global solution would be preferable but like in aviation, the efforts of the international organisation, in this case the International Maritime Organisation (IMO), are far from being sufficient.
We can certainly expect criticism from third countries at the global level. However, the international discussion on climate change has changed dramatically in the last two or three years. In 2019, at the COP25 in Madrid, the EU declared its objective to become climate neutral and was almost alone in the world with this decision.
Today, enshrined through the COP26 in Glasgow, climate neutrality is the new normal and a shared goal of many states around the world.
Therefore, unlike in the case of aviation a few years ago, it is clear that the EU now has partners in the IMO that support strong climate action and would help to avoid any kind of opposing action at the IMO level. That is why I am optimistic that the 50/50 approach is a realistic and fair one. However, this should not hinder more ambition at the global level. The EU must further work with its partners to strengthen the negotiations at the IMO and find solutions for the other 50% of international shipping from and to European ports.