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From the News Desk: Shipping objects over EU's carbon market vote

Rising costs, trade retaliation and undermining of global agreement could all result from EU plan on emissions trading becoming law, shipping stakeholders warn

The European Parliament’s vote to include shipping in the European Union’s Emissions Trading System from 2022, as well as a 40% carbon intensity target on big ships calling at EEA ports from 2030, has sparked an industry backlash

EUROPEAN lawmakers have backed a set of legal amendments on emissions reductions obligations that would affect around 11,500 ships calling at ports in the European Economic Area, backing the position that the environment committee took in July.

The plenary adopted Greens MEP Jutta Paulus’ proposal on changes to the Monitoring, Reporting and Verification regulation that covers emissions and data collection in the European Union for ships of 5,000 gross tonnes and above.

The European Parliament supported the proposal that as part of these amendments shipping should also be included in the Emissions Trading System, the bloc’s current tool to limit emissions from most industries, beginning in 2022.

Shipping should operate under a system of full auctions for emissions allowances, which means there should be no free allowances distributed to the sector. Sectors such as aviation operate with majority free allowances, but the European Commission has been reducing them.

Though shipping’s inclusion into the bloc’s carbon market is a separate issue from changes to the MRV, the vote endorsed efforts for both items to be deliberated concurrently. Under the adopted proposal large ships calling at ports in Europe will need to cut their carbon intensity by at least 40% by 2030.

The commission has previously stated its intention to include the maritime sector in the carbon market.

However, in order to become law, parliament must now negotiate a final legal text with EU member states. Talks are unlikely to start until next year, with the current German presidency focused on a climate law and agreement on the EU budget in 2020, among other things.

It is clear that when those discussions eventually start, there will be some space between the parliament’s position and at the member state level.

Within hours of the vote, Greek shipping minister Ioannis Plakiotakis told a shipping forum in China that he does not believe a regionalised approach to the battle against climate change is the correct approach.

He said the de facto international nature of shipping will require an application of global uniform rules and standards and called for the conclusion of a global agreement on the reduction of greenhouse gas emissions via the International Maritime Organization. 

His view echoes that of Greek shipowners, who have previously made clear they do not think emissions trading is the answer, along with the International Chamber of Shipping and BIMCO.

Greece, together with some marine states and industry associations, has proposed an alternative solution that utilises an energy efficiency design index for existing ships and, according to Mr Plakiotakis, can be easily implemented.

The tanker owner industry association Intertanko has also voiced its opposition to the European Parliament vote, claiming the decision, if implemented, will have “serious consequences” for EU trade.

It could also end up costing the shipping industry up to an additional €3.5 billion per year, since allowances would need to be purchased for all CO2 emission reported under the current EU MRV regulation, according to the association’s technical director Dragos Rauta.

Managing director Katharina Stanzel added her concerns that it “could seriously undermine the efforts taken by the IMO” in reducing GHG emissions for international shipping.

Meanwhile, dry bulk shipowners have accused the EU of “ignoring” the shipping sector in pushing ahead with its ETS plan. Intercargo claims the decision shows “how distanced the thinking of European decision-makers is from the global dimensions of the shipping sector”.

It wants a thorough impact assessment of shipping’s inclusion in the ETS, warning that the move could result in trade retaliation, an increase in emissions and the decline of European ports.

Intercargo warned that the regional measure invited transhipment centres to be set up just outside EU borders. These would be served by large, efficient bulk vessels, while smaller, less-efficient ships would take cargoes onward to EU ports.

With the shipping sector looking for an international agreement on reducing environmentally-harmful emissions, attention will return to the IMO, which is aiming to restart talks on global GHG measures in November after Covid-19 resulted in the pause button being hit earlier this year.

Collaboration and co-operation is key to any progress, as an IMO and Singapore-organised panel discussed last week, while there are also many opportunities surrounding the development and application of new fuels.

The message is that industry still has a lot of talking to do before an agreement on shipping’s decarbonisation path can be found. Read more in the Lloyd's List Decarbonisation hot topic page

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