EU governments unlock €20 billion in carbon market exemptions for shipping

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According to a new analysis, government ministers are clearing €20 billion in exemptions for the shipping industry under the new maritime carbon market (ETS). Transport & (T&E), which produced the report, calls on governments to prioritize the polluter pays principle and end unjustified giveaways to an industry with a poor environmental record.

Last year, the European Commission announced the historic decision to integrate maritime transport into the EU carbon market. The proposal is now in the trilogue phase where national governments are discussing the final details of the proposal with the Commission and the European Parliament.

Governments want to phase-in (when the carbon market is fully operational) the EU ETS, while the European Parliament has proposed to launch the system in 2023 without a phase-in. If removed, as proposed by Parliament, emissions coverage would increase by 154 MtCO2 over seven years.

Jacob Armstrong, Head of Sustainable Transportation at T&E, said: “The ETS is a historic opportunity to tax pollution from ships and use that money to fund the decarbonisation of shipping. A delayed implementation of the carbon market for maritime transport risks instead granting a significant and unjustified subsidy to large companies.

In the European Commission’s initial proposal, all ships under 5,000 gross tonnage (GT) are exempted despite significant emissions from these ships. High emitting vessels serving offshore oil and gas installations are also excluded. Proposal only covers carbon dioxide, leaving methane escaping from LNG ships out of reach[1].

The European Parliament removed most of the exemptions from the Commission’s proposal before the summer recess, however, EU member states came forward with a much less ambitious proposal. Spain and Greece, for example, are asking for exemptions for ferries to islands, while Finland wants to exempt ice ships.

Jacob Armstrong concluded: “National interests make a mockery of the polluter pays principle. Ferries are easy to electrify while offshore oil and gas service vessels are big polluters. They should not be exempt. Introducing a carbon market for shipping is a big step forward, but for it to work effectively, countries cannot choose which emissions are worth pricing.

The Council’s position – which mirrors those of national governments – gives a total of €20 billion in additional exemptions between 2023 and 2030 compared to the EU executive’s landmark proposal in 2021. Parliament’s position European, on the other hand, would increase revenues by 43 billion euros, according to the analysis of T&E shows. T&E recommends that the EU adopt the most ambitious carbon market possible and use the funds to support the deployment of green shipping fuels, such as hydrogen, in this decade [2].

ENDS

Notes to Editor

[1] While ships running on liquefied natural gas (LNG) emit less carbon dioxide (CO2) than traditional fuel oil, they are not zero emissions and emit significant amounts of methane, which warms the atmosphere 80 times more than CO2 short term. View previous T&E survey.

[2] T&E analysis shows that channeling maritime ETS revenue into contracts for difference (CfD) – subsidies to run ships on green fuel at the same cost as conventional fuel – could green shipping by 9 million of containers.

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