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29. June 2022

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One step closer to ETS for shipping

EU’s emission trading system (ETS) is one step closer to being realized. Last night the European Council agreed on a general approach to ETS and now the way is paved for the final negotiations.

Every little climate effort adds to the bigger picture. And with a giant like the EU emission trading system, many important issues must be solved before we reach the goal. At the same time a lot of different interests and considerations are at play.

Tonight, yet another one of the big issues was solved when the European Council established their common opinion on ETS at a meeting in Luxembourg.

Many industries have already been included in ETS for several years, but it is the first time that shipping will pay a price for its emissions under the ETS. Shipping is in many ways more complicated to regulate than e.g., land-based factories. Ships move around and will often operate globally. On top of that, shipping has a particular ownership structure which demands a focus on enforcement.

That is why Danish Shipping has been closely involved in the draft proposal and now during negotiations in the Parliament and the Council. And two key victories have been won:

” We have two main priorities; that ETS will be a driver for real reductions and that it will be enforceable. I think this is reflected in the position that the member states have now agreed on”, says Maria Skipper Schwenn, Executive Director of Security, Environment and Maritime Research in Danish Shipping.

One of the most important things that the Council has listened to is that you need to consider the total carbon footprint of fuels and to look at all greenhouse gasses from production to combustion. This is important since the new e-fuels are more expensive, and it has to pay off to use renewable energy in production. It would support the development and usage of e-fuels which is also the foundation of Denmark’s Power-to-X-strategy and not least of the recent political agreements on increasing offshore wind energy. Very positive, that Denmark has succeeded in raising such a difficult issue on the agenda”, says Maria Skipper Schwenn.

Using the life cycle perspective makes sense for the vast majority but shipping is just a small part of the overall ETS negotiation which includes everything from buildings and road transport to energy heavy industry and power plants. 

Thus, there has not been political opposition to the life cycle perspective but rather reluctance out of consideration for the compromise on difficult issues such as buildings and power plants. Therefore, it will not be until 2026 that we will start looking on the carbon footprint in the total life cycle of fuels.

Previously, the life cycle perspective was not a common term. We have played a part in changing this and in introducing it from 2026 and we will take that as a victory. Also, it is a step in the right direction that it has been decided to include greenhouse gasses other than CO2. This means that the regulation is future proof and will not e.g., promote the usage of natural gas and infrastructure”, says Maria Skipper Schwenn.

 

Not yet fully negotiated

In the fall, the final negotiations on the emission trading system will start. During the trilogue negotiations the Parliament, the Commission and the Council will negotiate on the final text of the emission trading system, which until further notice will come into force in 2023.

” Last night’s decision in the Council does not mean that the ETS regulation is now carved in stone, but it means that the regulation is underway. Now we know the positions from both the Parliament and the Council, and we will continue to fight for our key issues and to ensure that shipping will not be “sacrificed” in a bigger compromise late one night”, says Maria Skipper Schwenn.

Danish Shipping will once again make its opinion clear on who should carry the responsibility of paying the CO2-allowances in the contractual agreement. It is Danish Shipping’s opinion that it should be up to the involved parties of the contract to decide this without external interference.

Members of Danish Shipping can sign up for a webinar about the complete EU Fit for 55-package, which will take place online on Thursday 30 June at 10-11. 

Sign up here