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Latest research confirms EU Emissions Trading Scheme will cost shipping billions

The International Transport Intermediaries Club has warned of a potential multi-billion-dollar impact on the shipping industry due to the EU's Emissions Trading Scheme (ETS) extension, which becomes active as of January 1, 2024.

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In a recent press release, the International Transport Intermediaries Club (ITIC) has projected that the European Union’s (EU) new Emissions Trading Scheme (ETS) could impose costs in the billions on the shipping industry.

Set to be enforced from January 1, 2024, the extended EU ETS will establish an annual absolute limit on greenhouse gas emissions for vessels of 5,000 gross tonnage and above calling at EU ports.

Despite the regulatory push towards environmental sustainability, the implementation of the ETS is causing friction between shipowners and charterers, particularly regarding the fair distribution of costs and legal risks within charter agreements.

Robert Hodge, General Manager at ITIC, stressed the crucial role ship managers play in mitigating risks associated with the EU ETS, emphasizing the necessity for clear responsibilities and liabilities outlined in ship management agreements.

Highlighting the potential for the EU ETS to cost the industry billions in additional fees, Hodge urged ship managers and charterers to thoroughly assess all aspects of the costs and legal risks associated with the scheme.

The warning from ITIC follows the recent meeting of BIMCO’s documentary committee, where an ETS allowances clause for ship management agreements (SHIPMAN) and three ETS clauses tailored for voyage charter parties were adopted. Crafted to facilitate compliance with evolving regulations, these clauses offer a strategic approach to navigating the changing landscape of carbon emissions in the maritime sector.

Passing the buck: lineshippers pass ETS costs on to customers

Adding to the complexity, major lineshippers have already declared their intent to pass the costs of the EU ETS onto their customers, introducing a carbon pricing mechanism to the shipping industry. 

As Trans.iNFO has earlier reported, shipping lines will be obligated to report emissions and purchase allowances on the EU ETS market following a phased schedule:

  • In 2024, 40% of reported emissions must be converted into allowances.
  • In 2025, 70% of reported emissions must be converted into allowances.
  • From 2026 onwards, 100% of reported emissions must be converted into allowances.

To cover the added costs resulting from the EU ETS, major shipping companies such as CMA CGM, Maersk, and Hapag-Lloyd have announced the introduction of surcharges on applicable bookings.

Based on the published estimations, CMA CGM is set to impose an additional EUR 43 per TEU for dry goods shipped from Asia to North Europe and EUR 65 per TEU for reefer containers. For the East Asia to South Europe route, the surcharge is estimated at EUR 25 per TEU for dry containers and EUR 40 per TEU for reefers.

At the same time, Maersk plans to charge an extra EUR 12 per TEU for dry goods and EUR 31 per TEU for reefers shipped from East Asia to North Europe. For the East Asia to South Europe route, the additional surcharge is expected to be EUR 7 per TEU for dry containers and EUR 16 per TEU for reefer containers.

Hapag-Lloyd’s announced surcharges, as outlined in the estimates, indicate an additional EUR 12 per TEU for dry goods and EUR 31 per TEU for reefers on the East Asia to North Europe route. For shipments from East Asia to South Europe, the surcharge is estimated at EUR 7 per TEU for dry containers and EUR 16 per TEU for reefer containers.

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