EU Parliament approves shipping’s inclusion in regional emissions trading

The European Parliament has approved reforms to the European Union’s (EU) Emissions Trading System that will now include emissions from maritime and aviation.

Once ratified by EU member states, the new ETS rules covering maritime will be phased in over three years and require operators of vessels over 5,000 gt to pay for emissions allowances covering 40% of emissions from 2024, 70% in 2025 and 100% in 2026.

Ships travelling within the EU will be required to pay for all emissions, while 50% of emissions will require compensation for vessels arriving and departing from EU ports on routes that originate or terminate in ports outside of the EU, respectively.

The rules would also earmark some US$2Bn in revenues from emissions taxes and funnel them back into maritime industry efforts, including research and development, to spur uptake of new, cleaner fuels and technologies in the sector through a so-called Innovation Fund.

“Setting aside part of the ETS revenues for maritime is a victory for the energy transition of the sector. Dedicated support through the Innovation Fund is indeed key to bridge the price gap with clean fuels,” European Community Shipowners’ Associations (ECSA) Secretary General Sotiris Raptis said.

ECSA said it also welcomes the legislation’s “upholding of the ’polluter-pays principle’ through mandatory requirements for the pass-through of the EU ETS costs to the commercial operators of the vessels,” typically charterers, as opposed to shipowners.

According to the Euopean Parliament, the reform of the Emissions Trading System increases the ambition of the ETS, with GHG emissions in sectors covered by the ETS facing a required cut of 62% by 2030 compared to 2005-levels.

The revision to the region’s carbon market also phases out free allowances to companies from 2026 until 2034 and includes methane emissions and nitrous oxide (NOx) emissions as well as carbon dioxide (CO2) emissions for the first time. The legislation also creates a separate new, second ETS (ETS II) for fuel for road transport and buildings that will put a price on GHG emissions from these sectors in either 2027 or 2028, depending on energy prices.

EU Rapporteur Peter Liese, who was key in getting the legislation passed intact, said, “With its extension to maritime transport, the existing ETS alone will accomplish 25 times as much CO2 savings by 2030 as the controversial regulation on CO2 emissions from cars.”

The ECSA has been vocal and active in lobbying to push for earmarking of revenues throughout the EU’s ’Fit for 55’ package of policy measures that are set to include maritime, including both the ETS and FuelEU Maritime measures. Fit for 55 is the EU’s plan to reduce greenhouse gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels.

“Ensuring access to affordable clean fuels is a major challenge for the decarbonisation of shipping. Clean fuels currently sit on the most expensive side of the spectrum and therefore action is needed to bridge the price gap. To meet the targets of the FuelEU [legislation], the earmarking of the ETS and FuelEU revenues back to the sector becomes even more essential. This, together with ensuring fuel suppliers are responsible for making clean fuels available, is critical to ensure shipping can deliver on its decarbonisation objectives,” ECSA secretary general Sotiris Raptis said in October.

The ECSA also took the opportunity to lobby for the EU to include a series of general and specific types of fuels and technologies in forthcoming legislation, the new Net Zero Industry Act, that will, in part, address the maritime sector.

“We welcome the inclusion of offshore renewable technologies and carbon capture and storage in the list of strategic net-zero technologies. In addition, renewable fuels of non-biological origin (RFNBOs) should be included in the Act, so that dedicated production capacity can be swiftly developed ,” Mr Raptis said.

In late March, the EU Parliament and EU Council struck a provisional deal on the so-called FuelEU Maritime initiative, which will see ships required to gradually reduce greenhouse gas (GHG) emissions by curbing GHG intensity — measured in grams of CO2/megaJoule (MJ) of energy — by 2% as of 2025, 6% by 2030, 14.5% by 2035, 31% by 2040, 62% by 2045 and 80% by 2050.

As the regulation stands, the GHG cuts will apply to ships above 5,000 gt and “to all energy used on board in or betweeen EU ports, as well as to 50% of energy used on voyages where the departure or arrival port is outside of the EU or in EU outermost regions,” a statement from the EU Parliament said.

Shipowners who use renewable liquid and gaseous fuels of non-biological origin (RFNBOs) between 2025 and 2034 will receive more emissions offset credits than those who do not.

RNFBOs are a product group of renewable fuels defined in the EU’s Renewable Energy Directive. They are fuels that are produced from renewable energy sources excluding biomass and include hydrogen and hydrogen-derived fuels.

In the terms of the provisional agreement, members of the European Parliament (MEPs) included a review of the rules by 2028 “to decide whether to extend emission-cutting requirements to smaller ships or to increase the share of the energy used by ships coming from non-EU countries.

The deal also set a ratcheting clause that would see the introduction of a 2% renewable fuels usage target for shipping implemented by 2034 if a 2031 EU Commission review finds that RFNBO use amounts to lower than 1% of shipping’s overall fuel mix within the EU.

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