Shipping to Join 2030 Emissions Target via ETS Climate Fund?

A proposal to include emissions from shipping in the European Union’s 2030 emissions reduction target through the EU emissions trading system (ETS) has gained cross-party support among Members of the European Parliament (MEPs), according to Transport and Environment (T&E).

The amendment calls for shipowners to buy ETS allowances from 2021 onwards or pay an equivalent amount into a new climate fund that minimises administrative burden by buying allowances collectively on their behalf.

The fund will also function as a flow-back mechanism by reinvesting 20% of the allowances’ revenues to make the shipping industry and ports more efficient. This new source of financing is expected to support carbon-saving retrofitting, innovative technologies and port charging schemes. T&E estimates that this would roughly amount to EUR 1 billion (USD 1.1 billion) at the outset.

The proposal is based on the existing EU monitoring system (MRV) of shipping emissions to keep to a minimum the extra administrative cost for shipowners, ports and authorities. The owners of ships arriving at or departing from EU ports would have to either buy directly EU ETS allowances to cover their CO2 emissions or pay an equivalent amount into the fund that will collectively purchase and retire the required number of allowances on their behalf.

Having escaped any explicit reference in the Paris agreement, industry and the IMO are facing increasing pressure to deliver on the climate front. The IMO had started moving towards defining a ‘fair share’ contribution by the shipping sector to curbing climate change, but a decision on a work plan has been delayed at its last meeting in April. It next meets in October.

The EU’s legislation on the monitoring, reporting and verification (MRV) of maritime GHG emissions came into force in July 2015 and will become operational in 2018. Last year a European Parliament study found that shipping will be responsible for 17% of the total emissions in 2050 if left unregulated.

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Posted on September 5, 2016

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