The transition to fossil-free shipping can be a good deal for Sweden

13 October 2022

Emission rights, energy taxes and more expensive fuels. The transition to a fossil-free shipping will of course come at a cost. But for Sweden, it doesn't necessarily have to be that expensive. This according to a new pre-study from Lighthouse.

Shipping has so far escaped taxes, but if the EU as planned introduces the measures within Fit for 55 (ETS, ETD and FuelEU Maritime) it will in the future have to pay for its emissions.

- This means that "normal" taxes and fees are also introduced for shipping. The costs actually existed before in the form of damage to nature, the environment and people, says Karl Jivén, a researcher at the IVL Swedish Environmental Institute, who led the work on the pre-study Costs for decarbonising shipping - An impact study for shipping companies and Swedish business.

When shipping is incorporated into the EU's Emissions Trading System (ETS) and fossil shipping fuels begin to be taxed, the more expensive alternative fuels can start to assert themselves in a changing market.

- The costs of fuel that is bunkered in Sweden are expected to rise from the order of one billion euros to three billion euros annually.

Initially, the costs will mostly consist of emission rights and taxes, but as alternative low-carbon fuels are introduced, the additional costs will instead be linked to the purchase of renewable fuels.

- However, it is not certain that it will be that expensive. We have calculated what the same amount of energy used today will cost with alternative fuels. But if the fuel suddenly becomes three times as expensive, then of course a number of additional measures regarding energy efficiency will be implemented. I simply don't think that you will get rid of the same amount of energy in the future, says Karl Jivén.

However, the fuel cost is only part of the total transport cost. Port charges, costs such as time charter, loading and unloading are other things that are added, for example.

- The total transport cost can be, for example, 20-30 percent more expensive. It sounds like a lot, but will usually not significantly affect the final price of an item in the trade. One can, for example, compare with container prices, which have doubled in recent years without directly affecting trade.

The big sticking point is not about the price, but about the large volumes of alternative fuels that are needed to supply shipping.

- Shipping cannot solve this by itself, society must facilitate the construction of fuel factories and biogas production facilities and so on. It is easy to think that alternative fuels will become cheaper over time, but the prerequisite for that is to actually start producing them, says Karl Jivén.

There are great business opportunities for Sweden here. The northern parts of the country are, for example, well suited for the production of electrofuels where large pipelines are planned to be built.

- This is a billion-dollar industry that could not only benefit ports and fuel companies, but locally produced fossil-free energy could also create lots of green jobs in other industries. The money stays here, so to speak, instead of ending up with a rich oil sheik, says Karl Jivén.

Footnote. The pre-study has been written by Karl Jivén (IVL Swedish Environmental Institute), Kevin Cullinane (University of Gothenburg), Lydia Jialin Yang Lydia (University of Gothenburg), Cecilia Andersson (IVL Swedish Environmental Institute)

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