EU’s proposed carbon pricing rules let half of Europe’s ships off the hook


EU’s proposed carbon pricing rules let half of Europe’s ships off the hook


The European NGO Transport & Environment (T&E) found in a new study that the European Commission's proposed carbon pricing scheme for shipping will let small vessels slip through the net, exempting millions of tonnes of carbon dioxide from tax.

The EC's plan to include shipping in the EU Emissions Trading System (ETS) only applies to vessels with a gross tonnage of more than 5,000 GT. There are a number of exemptions for certain types of vessels, such as fishing vessels and offshore supply vessels. According to T&E, this means that the law will exempt more than half of Europe's ships and 20% of EU carbon dioxide emissions from shipping. The EC calculated that just 10% of emissions would be exempt under the regulations upon its release of the proposal.

Accordingly, the EC's goal is to lessen the administrative complexity of adopting carbon pricing for its fleet by focusing on high-emitting boats. T&E contends that gross tonnage, a frequently used measure for differentiating vessel classes and setting rules, is a problematic choice for carbon dioxide emissions. T&E suggests that a regulatory threshold should be set based on yearly carbon dioxide emissions, with ETS control kicking in at 1,000 tonnes per year. T&E estimates that this would cover an additional 12% of EU shipping emissions.

Additional amendments have been requested by European shipowners, including the introduction of a “polluter pays” clause, which would shift the financial burden of paying to the operator or charterer. The shipowner, even if they have limited control over fuel usage, would be responsible for paying the ETS bunker tax under the current proposal; their ability to pass the cost on to the charterer would be determined by market forces and commercial negotiation.

The European Community Shipowers' Associations (ECSA) has also requested that ETS earnings be used to fund clean-shipping R&D and zero-carbon fuel subsidies.

A recent analysis by the UK-based think tank UMAS argues that the EU ETS plan will not have the expected effect, regardless of which ships are covered or who pays. UMAS argued that the ETS would not make a meaningful impact to bridge the gap between fossil shipping fuels and zero-carbon fuels even at a carbon price of US$67 per tonne. To have an impact, UMAS calculated that a price level of almost three times that amount as well as a higher coverage share for emissions from overseas voyages would be required.

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