The shipping industry is set to fork up to €17.2 billion (US$18.9 billion) to comply with Europe's Emissions Trading System (ETS).
Calculations made by Hecla Emissions Management showed that the maritime industry's cost of compliance will reach €3.1 billion (US$3.4 billion) in 2024, €5.7 billion (US$6.3 billion) in 2025 and €8.4 billion (US9.2 billion) in 2026.
EU's ETS — the world's first international emissions trading system — will begin in 2024 and would include ships above 5000 GT transporting cargo or passengers for commercial purposes. The EU MRV system will then be extended from 2025 to apply to offshore ships above 400 GT and general cargo ships between 400 and 5000 GT transporting cargo for commercial purposes.
Hecla noted that the EU MRV dataset, which mandates that all ships above 5,000 gross tons collect and report information on CO2 emissions released to and from EU and EEA ports, is an effective gauge for the ETS. It will then serve as the bases for shipping's inclusion in the EU ETS from January 1, 2024.
"Taking into account the ETS phase-in period covering 40% of emissions in 2024, 70% in 2025 and 100% in 2026, and utilizing the forward curve in EUAs, our estimates indicate that the shipping industry could be liable for €3.1 billion in 2024, €5.7 billion in 2025 and €8.4 billion in 2026," Hecla, a consultancy set up by Wilhelmsen Ship Management and Affinity Shipping to help the shipping industry manage the obligations, said.
It added that based on the EU MRV dataset for shipping's European CO2 emissions for the year 2022 released recently, total ETS-applicable emissions for the maritime industry amounted to 83.4 million metric tonnes of CO2 equivalent (tCO2e) in 2022, a modest decrease of 0.22% from 2021.
At the current market value of €90 per emissions allowance (EUA), Hecla said shipping emissions carried a total worth of €7.5 billion for the year.
In their analysis, Hecla used the 2022 data and factored in the three-year phase-in period of the ETS.
"The projected liabilities emphasize the importance of shipping companies preparing for their entry into the ETS," said Hugo Wilson, director of Hecla Emissions Management.
"We have been onboarding customers from across shipping's value chain in order to have them fully prepared by the start of next year. We encourage more shipping companies to do the same," he added.
Notable segment decreases and increases
The data showed emissions decrease across multiple shipping segments, including tankers, container ships, general cargo ships, reefers, Ro-Ros and chemical tankers.
Hecla said the container sector showed the largest reduction, falling by 8.95%, equating to 2.3 million metric tonnes of CO2 equivalent (tCO2e) saved.
However, passenger ships and LNG carriers logged substantial increases.
The former scored highest, with a staggering 118% year-on-year rise, equating to 2.8 million (tCO2e), the latter recording a 63% increase equating to 2.1 million tCO2e.
Hecla said it is also important to note that the changes in emissions levels are less reflective of improved environmental operations as they are of altered European trade patterns.
It said container shipping, for example, experienced a bumper year in 2021 versus a noticeably cooler market in 2022, while LNG carriers saw a dramatic trading shift away from Asia towards Europe as Europe reduced its reliance on pipeline gas in the wake of Russia's invasion of Ukraine, importing significantly more LNG by sea.