- Europe’s emission trading system (ETS) is ‘a cornerstone of the EU’s policy to combat climate change’ according to the European Commission (EC).
- It operates in all EU countries plus Iceland, Liechtenstein and Norway.
- It is intended to limit emissions from heavy energy-using installations and airlines operating between these countries.
A recent article published in the Ship Insight written by Paul Gunton deals with how the shipping functions within the Europe’s emission trading system (ETS).
How does the ETS work?
The EU ETS works on the ‘cap and trade’ principle.
A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system and this cap is reduced over time so that total emissions fall.
As the EC’s website explains, “within the cap, companies receive or buy emission allowances, which they can trade with one another as needed.”
They can also buy limited amounts of international credits from emission-saving projects around the world. The limit on the total number of allowances available ensures that they have a value.
“After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances.”
“Trading brings flexibility that ensures emissions are cut where it costs least to do so. A robust carbon price also promotes investment in clean, low-carbon technologies.”
The EC believes the ETS has proven to be an effective tool in driving emissions reductions cost-effectively.
Emissions from installations covered by the ETS declined by about 35% between 2005 and 2019. It is now aiming to link the EU ETS with other compatible systems.
Aviation and shipping
At present, aviation is the only transport mode covered by the ETS.
It was brought into the system in 2012, originally covering all flights to and from EU airports.
Environmental NGO Transport & Environment recalls that, “following significant international and industry pressure, the scope was reduced to cover intra-EU flights only. … This was ostensibly to give time for the UN agency which regulates aviation, ICAO, to agree a global measure.” A second extension was agreed in 2014 and is due to end in 2024.
Industry and regulators meet
It was against this background that two government ministries in Cyprus, with the support of the country’s European Parliament Office, organised an online seminar on 7 December titled ‘ETS in Shipping: Elixir or Threat to Sustainability?’
It brought together representatives of the European Parliament, the EC, NGOs and shipowners “to provide insights that can best serve EU objectives,” the invitation explained. Those objectives, it went on, are “to enable maritime transport to make a meaningful contribution to climate change whilst safeguarding its competitiveness.”
EC’s response
Responding to the seminar’s contributors, Ms de la Torre confirmed that no decision has been taken about whether shipping will be included in the ETS.
A tax on emissions is another option, she said, or a combination of measures, “which I think is the way we’re going.”
She also floated the idea of a ‘closed’ – ie, an industry-specific – ETS for shipping.
An ‘open’ scheme, she believes, would give the maritime industry “access to cheaper abatement opportunities in other sectors” and thus may not result in emissions reductions in shipping itself.
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Source: Ship Insight
