2020 December 15
The European Union's leaders have reached a deal to cut EU greenhouse gas emissions by 55 percent by 2030, nearly matching a European Parliament goal of a 60 percent reduction over the same timeframe. The ambitious target is likely to raise the price of carbon credits on the EU Emissions Trading System marketplace from about $30-37 per tonne today to nearly $110 per tonne in 2030, according to new estimates published by Refinitv.
If the EU decides to impose the Emissions Trading System on some portion of the vessels trading to or between European ports, as is expected, this would mean significant new costs for shipping. The European Parliament has already passed a proposal to include coastwise intra-European voyages in the ETS scheme, and it is possible that a final regulation could cover "full scope" (overseas voyage to the EU) ship emissions as well.
Refinitv's $100-plus ETS carbon price estimate would have serious implications for vessel operators. One tonne of bunker fuel becomes three tonnes of CO2 when combusted, meaning a $300-plus emissions charge for every tonne of fuel consumed on a regulated voyage. That would come close to doubling today's VLSFO prices.
The cost impact of a "full scope" ETS charge would have a potential impact on shipping economics and routing, according to a study released by the European NGO Transport & Environment on Monday. Some industry insiders have warned that implementing the ETS for extra-European voyages could simply prompt vessel operators to alter their routes in order to reduce their exposure. By making a short stop in Morocco or another nearby non-EU nation, a vessel could minimize the length of its regulated "voyage" to a European port. At a carbon price exceeding $100, according to T&E's calculations, the extra port call would start to make business sense for voyages over about 3,000-5,000 nautical miles in length, depending upon vessel size. Asia-Europe services would fall into this category, along with many transatlantic routes.
T&E also suggested that the cost of a carbon charge would be nominal for the shipper and consumer. For a voyage from Singapore to Spain, it would add roughly $10 per TEU at today's ETS carbon prices - equivalent to $30 per TEU at a predicted $100-plus carbon price in 2030. By comparison, current Asia-Europe spot rates are in excess of $2,000 per TEU.