Asian shipping companies to face over €1 bln in emissions costs under new EU regulations

Asian shipowners are set to incur emissions liabilities exceeding €1 billion due to the complete implementation of the EU Emissions Trading System (EU ETS), affecting vessels operating to and from Europe. According to Hamburg-based maritime technology firm OceanScore, companies registered in China and Singapore are projected to shoulder the heaviest financial burden.

The EU ETS, which came into effect on January 1, 2024, mandates that around 4,000 Asia-flagged vessels—constituting roughly one-third of the cargo and passenger ships over 5000gt currently subject to the system—surrender millions of EU Allowances or carbon credits. This move is part of the EU's broader effort to combat climate change by reducing greenhouse gas emissions across various sectors, including the maritime industry.

OceanScore's analysis reveals that Asia-based Document of Compliance (DoC) holders are expected to surrender between 15-16 million EUAs for emissions associated with their voyages to and from the EU. The costs for Asian shipowners are estimated to hit around €500 million this year alone, with a phased increase to 100% liability by 2026.

The cap-and-trade principle underlying the EU ETS is designed to incentivize investments in cleaner technologies by making the cost of emissions a significant factor in operational decision-making. Despite the current carbon price standing at a relatively low €55 per ton of CO2, the volatile nature of this market could lead to increased financial pressures on shipping companies.

Major industry players, including China's COSCO, Hong Kong's Anglo Eastern Ship Management, and South Korea's HMM, are among the 400 DoC holders impacted by this regulation. Non-EU companies are forecasted to contribute 40% of the nearly 80 million EUAs that must be surrendered when the EU ETS is fully phased in.

The introduction of the EU ETS represents a significant push towards reducing the environmental impact of international shipping, urging companies within the industry to innovate and adapt to a changing regulatory landscape. As such, the response of Asian shipowners to the EU's environmental policies will be instrumental in shaping the global maritime industry's path toward sustainability.