According to Sea Intelligence, the European Union’s Emissions Trading System (ETS) is effectively a carbon tax for ships operating within, to, or from the EU. Ships must pay based on 100% of emissions between two EU ports and 50% for trips between an EU and non-EU port. As shipping companies update their networks, these changes will greatly impact their ETS costs, offering potential cost advantages or disadvantages.
MSC’s Competitive Advantage in ETS Costs
MSC’s network design significantly reduces the reportable distance between Asia and Europe, giving it a major cost advantage under ETS. In contrast, Ocean Alliance faces a disadvantage, with only a 7% reduction in their current network. However, it’s expected that Ocean Alliance will adjust their Asia-Europe routes in 2025 to minimize ETS exposure.
Reducing ETS Costs by Calling Non-EU Ports
For maximum ETS savings, vessels should call at the closest non-EU port to the first or last EU port of call. This reduces the emissions subject to the carbon tax, as only 50% of emissions are reportable for journeys between an EU and non-EU port. For example, ships stopping at a non-EU port between Singapore and Algeciras can significantly reduce their taxable emissions.
Calculating ETS Savings Across Networks
By mapping reportable ETS sailing distances for different alliance networks and comparing them to the shortest possible benchmark, such as the Singapore-Algeciras route, shipping companies can calculate potential savings. This comparison helps operators optimize their routes and reduce their overall ETS costs.
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Source: Sea-Intelligence
