Press Release: New report stresses the need to refine the EU Emission Trading System’s inclusion of shipping to better reduce emissions and catalyse the uptake of zero-emissions fuels
A new report by UMAS for Environment Defense Fund Europe (EDF Europe) stresses the need to refine the design of the EU Emission Trading System’s (ETS) inclusion of shipping to effectively reduce greenhouse gas emissions from maritime shipping and advance zero-carbon alternative fuels. Reforms to its design such as an expanded scope, a sectoral emissions cap, and reinvesting revenues in shipping decarbonisation would all help build a stronger system able to generate meaningful emissions reductions in this decade.
The study found that the EU ETS carbon prices, even at the record levels of €67.75/tonne CO2 observed recently, would not make a significant impact to close the gap between fossil shipping fuels and zero-carbon fuels. Recent analysis by UMAS for the Getting to Zero Coalition shows that an average carbon price of just under US$200/tonne CO2 is required to fully decarbonise the shipping sector by 2050.
The report also stresses the potential benefits of widening the scope of the scheme’s emissions coverage but even under the full scope, the EU ETS may not provide a sufficient price incentive to drive investments in energy efficiency measures or SZEF. This is because most EEA related emissions come from ships which spend a relatively short period of time on EEA-related voyages during the year.
Other key findings include:
- The carbon price experienced by globally trading ships is small relative to fluctuation in marine fuel price, standing on average at 20% of the ETS carbon price
- This means emissions reductions may not happen within the sector but in other sectors financed by shipping through purchase of allowances in the ETS (~$9 billion in 2030)
- The low-price level and the exemption of methane emissions from the EU ETS could incentivise the uptake of LNG-fuelled ships, which can lead to environmental and policy cost-effectiveness risks.
Recommendations to policy-makers:
- Consider setting a limit on the use of out-of-sector (General ETS) allowances to promote shipping decarbonisation
- Extend geographical scope to Full MRV to cover 100% of EEA-related voyages
- Recycle revenues to promote the uptake of scalable zero-emission fuels and address disproportionate negative impacts on states and supporting a fair, inclusive and equitable transition.
Dr Sophie Parker, Principal Consultant at UMAS, lead author of the report said, “The shipping sector’s high abatement costs point to the need for an ETS which is tailored to support in-sector abatement. In the absence of a global carbon price, this could come from either a shipping ETS that places restrictions on the purchasing of out-of-sector allowances or coupling the EU ETS proposal with supply-side policies like subsidies which incentivise the uptake of scalable zero carbon fuels.”
