EU Emissions Trading Scheme Extended to Include Maritime Sector

EU expands emissions trading scheme to include maritime sector, driving sustainability efforts and emissions reduction in the shipping industry. A significant step towards greener practices.

Inauguration of Eco-Conscious Maritime Expeditions: EU Emissions Trading Scheme Receives Formal Endorsement

The latest edition of the Shipping Law News, Emission Possible on 25/04/2023, announced an important milestone in the realm of climate change policy and the maritime industry. After much deliberation, the European Parliament cast a favorable vote on 18 April 2023, endorsing the legislative modifications proposed for the EU Emissions Trading Directive (referred to as the “Amendment”). These revisions are instrumental as they signify the formal inclusion of the maritime sector within the ambit of the EU’s Emissions Trading Scheme (abbreviated as “EU ETS”). This decision marks a radical shift in environmental policy that aims to moderate carbon emissions across diverse economic sectors.

This move has been a topic of anticipation for nearly two years. After the first draft was presented on 14 July 2021, as part of the ‘Fit for 55’ package of climate and energy laws aimed at achieving the EU’s climate goals, the proposal had undergone a series of reviews and refinements. It was meticulously examined by various influential bodies such as the European Commission, the Council of the European Union, and the European Parliament. Watson Farley & Williams (“WFW”), a leading international law firm, has been closely observing and analyzing the probable alterations and their eventual repercussions on diverse maritime stakeholders.

Carbon Trading Landscape: A Lucrative Yet Costly Affair

Moving into 2023, the market for carbon allowances has shown surprising dynamism. In mid-February, the allowances reached an unprecedented high, trading at an impressive €101 per carbon tonne. However, as of 18 April 2023, they were trading slightly lower, at €95.31/tonne. While these numbers represent a robust trading environment, they also carry implications for businesses.

The secondary market for carbon, which allows for the trading of carbon allowances, has grown substantially in volume and value. This growth indicates that the carbon trading market can offer significant profit-making opportunities, especially for businesses or entities that have a surplus of allowances due to their lower carbon emissions. Conversely, businesses with high carbon emissions might find the market expensive, as they would need to acquire more allowances to cover their emissions.

Navigating 2024: Updates to EU ETS for the Maritime Sector

The Amendment brings about key modifications to the framework, with the scope now expanded to include a wider range of entities. The EU ETS will now cover ships over 5000 Gross Tonnage (GT) that are engaged in transporting cargo or passengers for commercial purposes, starting from 1 January 2024. Meanwhile, ships between 400 and 5000 GT will continue to be excluded from the scheme. However, keeping in line with the spirit of the amendment, the European Commission will reassess the feasibility of including these exempted ships in the scheme by the end of 2024.

A significant aspect of this expansion is the extent of emissions that the EU ETS will now cover. The revised scheme will encompass all emissions from intra-EU maritime voyages and from ships at berth in EU ports. In addition, 50% of emissions from voyages that either start or end at EU ports, with the other destination being outside the EU, will also be included. This development marks a significant step towards the EU’s commitment to reducing carbon emissions and encouraging more sustainable practices within the maritime sector.