Large variations in costs - new pre-study on shipping and emission allowances

An additional cost of between EUR 0.2 billion and EUR 12.5 billion per year. How shipping will be affected if included in the EU emissions trading system depends on how the system is designed. A new Lighthouse pre-study is taking a closer look at the consequences of the existing design proposals.

International shipping accounts for about three percent of the world's total greenhouse gas emissions, a figure that is expected to rise as world trade increases. That is why the EU, in its so-called Green deal, wants to include shipping in its emissions trading system - the EU ETS How this should be designed in detail has not yet been determined.

"There are major uncertainties about how an inclusion should be designed" Anna Melin, environmental economist at the IVL Swedish Environmental Research Institute, says.

She is one of several researchers from IVL and the University of Gothenburg, who has contributed on a new Lighthouse pre-study that tokes a closer look at a number of design proposals and the consequences of these.

"We consider it very likely that an inclusion of shipping in the EU ETS would be built upon the data and scope of the current MRV system, as the EU uses it today to collect data on, among other things, carbon dioxide emissions from ships calling European ports."

The system is covering the legs of a ship’s route before and after a port call to one of the EEA’s states.
"If it included all such shipping, the amount of CO2 emissions captured would be about 140 million tonnes, which corresponds to about 15 percent of international shipping emissions."

How much will this cost the shipping industry?

"It depends a lot on two things. First and foremost is the price of the emission allowences, which is influenced by several factors, but also the proportion of the allowences auctioned. We have tested two scenarios: one with 100 percent auction and where the price is expected to be 70 euros per allowance and one with only 5 percent auction and a price of 25 euros per allowance. The latter gives an estimated cost increase for shipping of EUR 0.2 billion per year, while the first scenario gives an increase of EUR 12.5 billion."

Read the pre-study: Including maritime transport in the EU Emission Trading System – addressing design and impacts