The EU ETS is an opportunity to create genuine change


Shipping’s inclusion in the EU Emissions Trading System (EU ETS) has created countless conversations over the past 12 months, as the industry prepares to comply with the new regulation. The EU ETS is a ‘cap-and-trade’ system, whereby the EU will set a limit each year on how much CO2 can be emitted, which decreases each year in line with the target to reduce emissions by 62% from 2005 to 2030. Companies will need to have a European Emission Allowance (EUA) for every tonne of CO2 they emit within each calendar year. Operators will not be allowed to generate more greenhouse gas emissions than their EUAs can cover. If they do, heavy fines are imposed, creating both a financial and regulatory incentive to reduce emissions and improve efficiency.


By Søren Meyer, CEO of ZeroNorth


According to a Reuters survey, the cost of an EUA is forecast to be on average €83.55 a metric tonne in 2024 and €88.95 in 2025. Shipping companies will be responsible for paying for emissions reported in the previous year in a phased implementation. In 2024, only CO2 emissions need to be covered by EUAs; in 2025, companies will pay for 40% of the emissions reported in 2024; in 2026, this rises to 70% of their emissions from 2025; and by 2027, they must cover 100% of their reported emissions.


A quarter of the revenue from maritime EUAs will go into the “Ocean Fund”, funding innovative decarbonization projects in the EU, with the rest going to Member States to specifically pay for maritime decarbonization projects such as port modernization, alternative fuel trials or funding projects in developing countries.


106 | ISSUE 107 | MAR 2024 | THE REPORT


The EU ETS revenue potential for shipping in 2024 is estimated to be in the range of €1.6bn, reach €5.5bn in 2025 and €8bn in 2026. However, the latter two figures are broader estimations as CH4 and N2O gases will need to be accounted for in addition to CO2 and the industry has no prior experience calculating these gases. While this is surely a step in the right direction, revenue from the EU carbon market is a drop in the ocean compared to what a global carbon tax could generate. The World Bank estimates this could be an estimated $1 trillion to $3.7 trillion by 2050, or $40 – $60 billion annually.


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