carbon funds — European shipowners are calling on the European Commission to ensure that carbon funds are used to support decarbonisation efforts within the industry. The European Community Shipowners’ Associations (ECSA) has raised concerns about the potential for double carbon charges and the need for billions raised from shipping to be redirected towards cleaner fuels and technologies.
Carbon funds: Strategic Importance of the European Fleet
The ECSA emphasised the significance of Europe’s maritime fleet, describing it as a strategic asset vital for keeping goods, food, and energy flowing in and out of the continent. Currently, while the EU constitutes approximately 15 per cent of global GDP, European shipowners control about 34.5 per cent of global shipping tonnage. This indicates that the EU plays a disproportionately large role in international shipping relative to its economic output.
Implications of the EU Emissions Trading System
The call to action comes just before the European Commission released its revised proposal regarding the EU Emissions Trading System (ETS) last Friday. As of January 2024, maritime transport has been included in the EU carbon market, with the current regulations affecting all vessels over 5,000 gross tonnes entering EU ports, regardless of their flag.
Under the existing system, shipping companies are mandated to surrender allowances for 100 per cent of emissions produced between EU ports, as well as 50 per cent of emissions from voyages between the EU and third-party countries. ECSA is particularly concerned about the relationship between the EU regulatory framework and any future global carbon measures that may be agreed upon through the International Maritime Organisation (IMO).
Demands for Legislative Clarity and Economic Support
Central to ECSA’s demands is the establishment of a clear review clause that would necessitate a reassessment of EU legislation once an agreement is reached at the IMO. This would help protect shipping companies from facing double regulation and payments. Furthermore, the association is urging Brussels to ensure that funds collected from the shipping sector are reinvested into decarbonisation initiatives.
According to an ECSA analysis, the shipping industry generates up to €9 billion annually for EU and national budgets through the carbon market. The association is advocating for legislation that requires member states to utilise this revenue to reduce the cost disparity between conventional and sustainable fuels, enhance the availability of cleaner options, and finance the development of new maritime technologies.
Need for Substantial Financial Support
ECSA has pointed out that sustainable shipping fuels are currently about four times more expensive than traditional marine fuels. Therefore, the level of financial support already extended to the aviation sector should be considered the baseline for what is needed in shipping, rather than the upper limit.
Expanding Eligibility for Clean Technology Funding
In addition to financial provisions, ECSA is advocating for broader eligibility criteria for clean technology funding. The European Commission’s Industrial Accelerator Act acknowledges net-zero technologies that enhance energy efficiency and deliver immediate emission reductions. ECSA believes that all such projects, including upgrades to existing vessels aimed at reducing emissions, should qualify for support.
Maintaining Fair Competition in the Shipping Sector
Another key concern for ECSA is the maintenance of fair competition within the industry. Any measures intended to bolster EU ports must preserve the integrity of the carbon market and ensure a level playing field across all shipping segments, avoiding any favouritism towards specific vessel types or activities.
Additionally, the association has called for enhanced protections for routes serving small islands, outermost regions, and ice-bound areas. ECSA argues that existing derogations should be extended and made automatic, mandatory, and suitable for the unique circumstances of these vulnerable regions, reflecting their limited transport options.
Simplifying Reporting Requirements
Finally, ECSA has urged for more alignment between EU ETS obligations and the FuelEU Maritime initiative. The association has pointed out that duplicate reporting requirements impose unnecessary administrative burdens on shipping companies, complicating compliance efforts.
Reactions to Recent Proposal
Following the publication of the European Commission’s proposal, ECSA expressed its approval of plans to reserve 110 million allowances, valued at approximately €10 billion, for maritime decarbonisation and the simplification of reporting processes. However, the association voiced concerns that the proposed package does not provide adequate support for clean technologies, extends key derogations only until 2035, and fails to commit to withdrawing the EU system once a global agreement is reached through the IMO.
