The implementation of the European Union Emissions Trading System (EU ETS) is set to significantly impact freight costs in Europe, particularly for the dry bulk shipping sector. According to Drewry, the “Fit for 55” package and the EU MRV regulation have already influenced the movement of more efficient vessels to reduce emissions-related costs.
Impact of EU ETS on Vessel Operations
The introduction of the cap-and-trade system, which requires shipowners to purchase EU Allowances (EUAs) for CO2 emissions, has led to a notable shift in the types of vessels operating in Europe. Drewry’s analysis indicates a decline in the number of older, less efficient vessels in the region, with a preference for younger, more efficient ships. The shift is expected to continue as shipowners seek to minimize the financial burden of emissions costs.
Rising Fuel Costs and Emissions
Drewry’s research highlights a projected rise in fuel costs due to the added expense of emissions under the EU ETS. For example, a 2017-built Supramax vessel operating without a scrubber could see fuel costs increase by 13% in 2024, with further increases expected by 2026. This increase will have a direct impact on the overall freight market in Europe, as operators adjust their fleets to manage costs.
Future Outlook for European Shipping
As the impact of the EU ETS intensifies, the trend towards operating more efficient vessels in Europe is expected to accelerate. Drewry predicts that financial pressure on carbon emissions costs will drive a continued shift in fleet composition, with shipowners increasingly favoring newer, eco-friendly vessels to mitigate the cost of compliance.
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Source: Drewry
