European Parliament Anticipated Voting For Updated ETS

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The European Parliament is scheduled to vote on the political agreement for the updated EU Emissions Trading Scheme on March 13, 2023. (ETS).

The inclusion of marine in the EU ETS as a component of decarbonizing shipping is welcomed by ESPO and FEPORT.

Allowances covering emissions

After a phase-in period between 2024 and 2026, the updated ETS system will apply to marine shipping and mandate that shipping companies submit allowances covering 100% of emissions on intra-EU voyages (between two ports in the EU) and in ports and 50% of emissions on extra-EU journeys (between a port in the EU and a port outside the EU).

Financial incentives to hasten shipping’s transition to a greener industry are supported by the managing bodies of Europe’s ports (ESPO) and private port businesses and terminal operators (FEPORT). Nonetheless, the EU ETS Maritime agreement’s geographic scope may still result in evasive port calls, where shipping corporations can change their routes or add a call to a port outside the EU to avoid contributing to the ETS.

Longer voyages put integrity in danger

Evasion will put the ETS’s integrity in danger by increasing emissions from longer voyages while doing little to encourage maritime companies to go green. Fewer allowances being auctioned means less money will be available for the sector’s decarbonization. Last but not least, evasive port calls will have a negative impact on employment and economic activity in some EU ports and weaken their strategic importance as centres for connectivity, renewable energy, and transportation.

To ensure monitoring and effective prevention of carbon and commercial leakage from EU ETS Maritime, more is required.

The political agreement’s consideration of evasion risks sends a positive message, and ESPO and FEPORT value the Commission’s commitment to tracking and reporting on the effects of EU ETS Maritime on port traffic, port evasion, and the traffic shift of transhipment hubs. The Commission should take action as soon as evasion is discovered, in the opinion of port governing bodies and terminal operators.

Also, FEPORT and ESPO appreciate the co-legislators efforts to adopt a definition of “port of call” that eliminates stops in ports that transship containers and are located near the EU.

However, in order to ensure successful monitoring of carbon and business leakage and take timely restorative measures, additional factors should be considered:

  • Early Warning: Once evasion is established, and trading routes have changed, it will be very difficult to reverse the negative development. The Commission’s intention to use AIS data and data from customs (to assess whether there are changes in maritime traffic) and the value of the goods imported and exported via EU ports, as indicators of potential evasion. However, these indicators only identify evasion after it has already taken place. The EU Commission should therefore use additional parameters that allow the early detection of evasive port calls and reconfigurations of shipping routes before they become irreversibly entrenched.
  • Consider possible distortions and evasion from all non-EU competitors: The EU Commission should monitor cargo diversion via all relevant non-EU ports, not only those ports where the total share of container transhipment traffic exceeds 65%. If cargo diversion also takes place via ports or terminals below this threshold, this latter should be lowered or abandoned immediately.
  • Stakeholder involvement: Port authorities, terminal operators and trade unions should be involved in the monitoring of the impact of EU ETS Maritime, and be continuously consulted on possible evasive trends. Both the European Port Forum and European Sustainable Shipping Forum should be consultative for the EU Commission in this respect.
  • Holistic approach: When monitoring the impacts of EU ETS Maritime, the focus should be on the cumulative impacts of the Fit for 55 package. This is especially true in the case of FuelEU Maritime. The impact of the current spike in energy prices on the competitive position of ports in the EU should be considered, as well as the trade and state aid policies of the EU’s competitors.
  • Use the revenues from EU ETS strategically: The decarbonization of the sector will require significant investments in green refuelling and recharging infrastructure in ports as well as adaptations of port superstructure. ESPO and FEPORT very much welcome that revenues from the maritime ETS will support maritime decarbonization through dedicated calls under the Innovation Fund. A significant part of the ETS revenues should be invested in ports in the EU via dedicated EU and national calls. The revenues should be allocated to EU Member States based on port calls to ensure that investments in decarbonisation can be made in locations where the emissions take place.

Evasion from the maritime EU ETS is a serious concern that continues to pose a threat to the credibility and robustness of the EU ETS. Early action is crucial as changes in port traffic and the reconfiguration of shipping routes are almost impossible to reverse once they occur.

ESPO and FEPORT are committed to supporting the EU Commission in its efforts to monitor carbon and business leakage and in swiftly adopting preventive and restorative measures.

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Source: FE Port