Cargo owners seeking to determine their Scope 3 emission liabilities from the logistics chain must contend with multiple calculation methods from different shipping lines that will affect their cost exposure to the EU ETS for shipping, according to an article published on the UECC website.
Navigating Emission Liabilities In The Logistics Chain
Cargo owners face challenges in determining their Scope 3 emission liabilities within the logistics chain due to varying calculation methods from different shipping lines. UECC, a Pure Car and Truck Carrier (PCTC) owner, aims to provide clarity to its clients by adopting a standardized methodology for calculating emission costs related to the EU Emissions Trading System (EU ETS).
EU ETS Overview
The EU ETS, effective from January 1, 2024, mandates shipping companies to purchase EU Allowances (EUAs) or carbon credits for each tonne of CO2 emitted when calling at European ports. UECC’s approach involves adopting a standardized methodology for allocating additional fuel costs across the value chain, adhering to the ‘polluter pays’ principle.
Challenges In Existing Approaches
Shipping lines’ diverse formulas for calculating emission costs pose administrative burdens and create confusion for cargo owners. UECC emphasizes the need for a uniform formula to avoid overcharging and ensure equitable distribution of EUA liabilities. Inconsistencies in calculations could lead to cargo owners paying more than their actual emissions.
UECC’s Standardized Calculation Formula
UECC adopts a calculation formula based on the ‘Ro-Ro GHG Emissions Accounting Guidance,’ developed in collaboration with the Association of European Vehicle Logistics (ECG) and Smart Freight Centre. This methodology aligns with existing industry and international standards, providing a harmonized and transparent approach for reporting logistics GHG emissions.
Ensuring Clarity, Transparency, And Predictability
UECC’s EU ETS solution aims to offer clarity, transparency, and predictability for clients, enabling them to accurately assess emission costs. The calculation method considers the cargo’s carbon footprint, ensuring clients pay for the emissions generated by their shipments without overcharges.
Carbon Intensity And Emission Reduction
UECC’s formula calculates EUA costs based on fleet average carbon intensity, cargo volume, and distance transported. High vessel utilization, maximizing cargo volumes per shipment, and support for green technologies contribute to lowering carbon intensity and EU ETS cost liabilities for cargo owners.
Market-Based Mechanism For Green Shipping
With the EU ETS acting as a market-based mechanism for carbon pricing, UECC emphasizes the attractiveness of green carriers investing in alternative fuels and technologies. The company has a roadmap for reducing the carbon intensity of its fleet, including investments in LNG-powered PCTCs and exploring carbon-neutral biofuels.
Incentivizing Decarbonization
UECC sees the EU ETS as a cap-and-trade system that incentivizes low-carbon technologies. By putting principles into action, UECC aims to contribute to reducing cost exposure for clients and making green shipping more appealing for achieving sustainability goals. The company’s commitment reflects the broader industry’s efforts toward decarbonization and environmental responsibility.
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Source: uecc
