EU’s 2030 climate target: ECSA publishes study on implications of EU ETS for shipping

17 Sep 2020

With the European Commission announcing an increased climate target for 2030 and aiming to extend the EU's Emission Trading System (EU ETS) to the shipping sector, ECSA is publishing its joint study with the International Chamber of Shipping (ICS) on the "Implications of application of the EU Emissions Trading System (ETS) to international shipping, and potential benefits of alternative Market-Based Measures (MBMs)" written by Dr Edmund Hughes.

"Implementing the European Green Deal, the Commission has put forward today a new increased EU emissions’ reduction target for 2030 aiming to extend the EU ETS to shipping," said Martin Dorsman, ECSA Secretary-General. "Since the IMO's Initial Strategy on Reduction of GHG Emissions from Ships was adopted in 2018, the shipping industry has been working hard towards these goals and made important progress. Additionally it has put forward a proposal for an International Maritime Research and Development Fund. The proposal seeks the establishment of a programme to accelerate the introduction of low-carbon and zero-carbon technologies and fuels for new and existing vessels. There should be absolutely no doubt that the industry is fully committed to decarbonisation and green energy transition. Yet many questions still remain as to whether an EU market-based measure (MBM), in addition to other short and medium term measures set by the IMO, would derail the international negotiations at the IMO and revert progress already made. Furthermore, is the EU ETS an effective and efficient measure? If not, what are the alternatives?

"Rather than blindly implement the EU ETS on the shipping industry that is already advancing towards decarbonisation, we should first answer all these questions with an independent, thorough and comprehensive impact assessment," Mr Dorsman continued.

In order to contribute constructively to the discussion, a study was commissioned by the industry to look at both potential advantages and disadvantages of the EU ETS on shipping.

One of the most significant findings is the mismatch between the EU ETS and the complex diversity of the numerous segments within the shipping industry:

"The characteristics of the numerous ship types, contractual relationships and operators present a highly complex market that is unlikely to be effectively or appropriately addressed suggesting a pragmatic approach by decision makers is required, as has already being demonstrated by the European Parliament’s recommendation to continue leaving road transport outside the scope of EU-ETS."

Furthermore, such a measure would undermine the international negotiations to implement the IMO’s Initial Strategy on Reduction of GHG Emissions from Ships and would increase political tension with third countries, potentially leading to trade disputes.

Another finding pertains to the dominance of SMEs within the industry, where “administrative burden and associated costs in comparison to other MBMs would be significant and should be a critical consideration for policymakers”.

The use of the revenues is another critical point: depending on the final set-up, the revenues from the EU ETS would most likely not support efficiency projects and, in that case, they would not facilitate the energy transition of the sector.

"ECSA invites all policymakers to enter into discussion with the industry and openly discuss both pros and cons of an EU action and the different policy options. We also look forward to fully contributing to the impact assessment exercise, which we insist is an absolute necessity," Mr Dorsman concluded.

Click here to download the study "Implications of application of the EU Emissions Trading System (ETS) to international shipping, and potential benefits of alternative Market-Based Measures (MBMs)".