Decarbonisation, emission trading scheme

UK to include domestic shipping in emissions trading scheme

The UK brings domestic maritime into its emissions trading scheme as OECD calls for governments to include short-sea shipping in decarbonisation targets.

The UK will include domestic shipping in its emissions trading scheme (ETS) from 2026. The move, announced by the UK Emissions Trading Scheme Authority as IMO’s Marine Environment Protection Committee (MEPC) met last week, allows the country to include domestic maritime greenhouse gas emissions reduction in its nationally determined contribution (NDC) under the Paris Agreement on Climate Change.

The scheme will be applicable to large maritime vessels only, of 5000 GT or more. In a statement, UK ETS Authority ministers said that the inclusion of maritime and other industrial sectors in the ETS was “part of a wider strategy to provide a long-term framework to incentivise UK industries to decarbonise… and the certainty that industries need to invest in new green technologies”.

The initiative, which follows recent government action in the US and Switzerland to regulate emissions from shipping, was announced on the same day that the Organisation for Economic Co-operation and Development (OECD) took part in a lunchtime presentation at MEPC, calling for greater action on decarbonising short-sea shipping.

Olaf Merk, Head of Ports and Shipping at OECD’s International Transport Forum, told delegates that governments should do more to bring domestic maritime into their obligations under the Paris Agreement. He noted that just 19 of 194 NDCs – the itemised pledges that countries make to reduce domestic emissions – currently include maritime emissions.

Government intervention

Merk highlighted several reasons why governments should take a more active interest in decarbonising short-sea shipping. The sector can be more easily influenced by government policy than deep-sea shipping due its regional or national nature. It is also characterised by high elasticity of demand thanks to more direct competition with land transport, meaning policy impacting cost and pricing can have a bigger impact.

The carriage of passengers means that short-sea shipping has higher visibility amongst the public. And the sector has already been proven as a good testing ground for maritime policies and technologies that would be harder to implement on deep-sea routes.

As well as urging governments to include NDCs, Merk suggested that governments could introduce taxation, subsides and incentives that favour decarbonisation on short-sea shipping. Emissions reduction could also become a required element of liberalisation of cabotage if it is being considered. And countries should also consider including short-sea shipping in their National Action Plans on maritime decarbonisation, seven of which have already been submitted to IMO.

While the UK ETS will only include larger vessels, Merk argued that “to be more effective, policies need to include as many vessels as possible in carbon pricing”. This approach would favour including vessels of 400 GT or above in the ETS. However, Merk added that carbon pricing needs to be deployed in a coordinated manner across transport sectors to avoid ‘reverse modal shift’, which would see shipping freight move back to more highly emitting road or rail services.