The European Union is making strides to reduce carbon emissions across multiple industries, and recently, the European Council and the European Parliament reached an agreement to move forward on a broad plan that includes placing maritime transport under the EU Emissions Trading System (ETS). This landmark decision is part of their ‘Fit for 55’ package, which includes an overall increase in EU-wide targets and additional funding to aid in the transition.
The ‘Fit for 55’ package is an important step forward for Europe’s ambitions to be climate neutral by 2050. It involves setting a binding target of reducing GHG emissions by at least 55% compared to 1990 levels—an increase from the original target of 40%. Through this package, the EU aims to drive innovation while catalyzing investments into clean energy technologies. If all goes according to plan, this could create a strong environment where businesses can thrive while they make significant contributions towards achieving their sustainability goals.
The inclusion of shipping into the scope of the ETS marks a major milestone in Europe’s efforts to reduce carbon emissions. In November 2020, representatives from both sides agreed that ships entering EU ports would need to monitor, report and verify their CO2 emissions starting 2023 and pay for them through allowances from 2024 onwards. These measures are aimed at facilitating compliance with international standards such as IMO 2020 and MARPOL Annex VI regulations. As it stands now, only 5% of global GHG emissions come from shipping; however, this sector has grown significantly over recent years, making it particularly important that these measures are taken seriously.
The agreement reached by the Council and Parliament on Sunday marketed the first time that shipping has definitively been included in the efforts. They agreed on a gradual introduction of obligations for shipping companies to surrender allowances starting at 40 percent of emissions from 2024, 70 percent for 2025, and 100 percent for 2026. As expected, the rules incorporate most large vessels into the ETS. Big offshore vessels of over 5,000 gross tons and above will be included in the 'MRV regulation' on the monitoring, reporting, and verification of CO2 emissions from 2025 and in the EU ETS from 2027. General cargo vessels and off-shore vessels between 400-5,000 gross tons will be included in the regulation from 2025 and their inclusion in EU ETS will be reviewed in 2026.
The final adoption of Fit For 55 package will pave way towards a more sustainable future as well as give clarity on how businesses should adjust their operations going forward. With this agreement in place, companies have time to plan out how they will take advantage of new opportunities or mitigate risks associated with increased regulation on shipping operations due to ETS inclusion. In any case, it is clear that the EU is serious about its commitment towards driving down carbon emissions across all sectors. Fleet owners or managers should be aware of these developments and explore ways in which their company can benefit from them or adjust accordingly if necessary.
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