In recent years, global concern over climate change and its environmental impact has surged, prompting action in various industries. One such industry under increased scrutiny is shipping, a significant contributor to greenhouse gas emissions. The European Union (EU) has taken a major step by expanding its Emissions Trading System (ETS) to include the shipping sector, aiming to reduce its environmental footprint

What is EU ETS and what it means for the shipping industry?

Imagine a world where combating climate change meets a global marketplace. That's the European Union Emissions Trading System (EU ETS) for you. It's not just a policy; it's the planet's largest carbon market in action.

And now, it's not just an option. All carriers are rolling out fees to comply with new European Union regulations aimed at reaching carbon neutrality, making the EU ETS a mandate you can't overlook.

But why now, you might ask? Well, the EU is serious about slashing greenhouse gas emissions. The latest target? A whopping 62% reduction by 2030, a significant jump from the previous goal of 55%. Ambitious, right?

So, when does this all kick in?

Brace yourselves, folks, because the revamped ETS Directive takes the stage on January 1, 2024.

Here is the implementation roadmap:

The share of emissions that must be covered by allowances gradually increases each year:

• 2025: 40% of emissions reported for 2024 must be covered by emission allowances

• 2026: 70% of emissions reported for 2025

• 2027 and beyond: 100% of reported emissions

What's the first thing you need to know about restrictions of EU ETS?

The EU ETS operates on a 'cap-and-trade' system, with a cap defining the total allowable greenhouse gas emissions. This cap decreases annually in line with climate targets of the EU.

Each allowance represents one tonne of CO2 equivalent, and going over your allowances means hefty fines. It's like a carbon budget you can't overshoot. But one can buy more allowances if needed.

Know how its done step by step here

But wait, who's in charge of this green operation?

Shipping Lines bear the responsibility. They're the ones keeping tabs on emissions and making sure they're reported accurately. The buck stops with them.

Now, what about the costs?

If a shipping line has a deal with another entity handling fuel or ship operation, they might get reimbursed for the ETS costs. However, these arrangements aren't just between the lines; they're expected to have contractual clauses that pass on ETS surrendering expenses as they should.

Find the recent updates from carriers on their carbon emission surcharges planned for 2024 in this article - 2024 EU ETS Charges: What You Need to Know from Every Carrier?

Where does the EU ETS apply?

It's not only between the EU countries but also extraterritorial.

The rules depend on the ship's route. For EU Member State ports, it's all in, 100%. But for international voyages, it's a 50/50 split – half the emissions count when coming in, and half when going out. It's a fair deal.

In the simplest terms, the applied ETS values will depend on the port-pair combination, where the same value will apply for both directions.

Now, let's talk about the costs for those neighboring container transshipment ports.

The European Commission is set to lay down clear regulations by the end of 2023. Until further notice, if you're stopping there, you're off the ETS hook.

But what about those rare moments when you stop at a port?

For things like refueling, repairs, or dealing with emergencies, you're in the clear – no ETS costs there. Those are non-ETS adventures.

One big question is, how do you keep an eye on all this?

Slipped up and forgot to surrender allowances? Well, be ready to cough up a penalty of EUR 100 for each tonne of CO2 equivalent missed. Not to mention, the company's name might end up on the public's radar, and not in a good way.

Worried about where you can have a convenient way to access live freight rates from carriers around the world while also being informed about the environmental impact of your shipments through updated carbon emission charges of those carriers? With Freightify, you can make more sustainable and cost-effective logistics decisions effortlessly.

But it's not all challenges.

EU ETS revenues are going to support the green transformation of the maritime industry through the Innovation Fund. In fact, they're looking at deploying about €1.6 billion to back sustainability efforts up to 2030. So, while the ETS may seem like a puzzle, it's really a crucial piece of the climate action plan, with rewards for those who play their part.

Now that you're up to speed on the expansion of the European Union Emissions Trading System (EU ETS) and what it means for the shipping industry, it's essential to stay on top of the latest updates from carriers regarding upcoming carbon emission surcharges for 2024.

These changes are a critical aspect of your logistics decision-making process, allowing you to make eco-conscious and cost-effective choices. In our next blog, we'll provide you with a comprehensive overview of all the carrier updates, ensuring you have the most relevant information at your fingertips when planning your shipments. Stay tuned for the insights that will help you navigate the evolving landscape with ease.

Related Articles:

1. 2024 EU ETS Charges: What You Need to Know from Every Carrier?

2. Are Forwarders Ready for the Green Revolution in Shipping? (Coming Soon!)