Expand the EU emissions Trading system’s scope

16 May Expand the EU emissions Trading system’s scope

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Expand the EU emissions Trading system’s scope

A deal to expand the EU emissions trading system’s scope, and make charterers pay its costs, is up for a key vote on Tuesday.

European lawmakers reached a compromise deal this week that would include all voyages in and out of the bloc by 2028 and include a binding clause letting owners pass on the cost of carbon allowances.

The European Parliament’s environment committee (Envi) will vote on the deal on May 17, with a plenary vote set for early June.

The European Community Shipowners’ Associations have long pushed for a charterer-pays clause, but container line lobby group the World Shipping Council is against it.

If passed, the compromise deal would have the ETS cover half of voyages in and out of the bloc from 2024, increasing to all voyages by 2028.

The scope would stay at 50% for third countries with their own ETS systems; those with agreements with the EU to set equivalent carbon prices; and least development countries and small island developing states that include shipping in their national emissions tallies under the Paris Agreement.

The WSC — which includes big charterers such as Maersk — and shipowner groups Danish Shipping and Italy’s Assarmatori have opposed the charterer-pays clause, saying it restricted freedom of contract.

“The market will deliver the right balance to determine to whom the cost of allowances should be allocated,” they said in a statement.

“Prescribing for the market who should be exposed to GHG pricing creates a barrier to innovation, slowing the energy transition to reduce GHGs from shipping.”

The groups said proposals to extend ETS coverage to 50% or 100% of international voyages “invite unwanted trade and political consequences”.

The compromise deal would put 75% of shipping’s ETS revenues in an Ocean Fund for decarbonisation research, with the rest used to protect and restore marine ecosystems.

But it also axes plans for a phase-in period, so 100% of verified emissions reported will have to be surrendered from 2024.

The ETS would cover methane and nitrous oxide emissions (emitted by LNG and ammonia engines respectively), instead of just CO2.

Smaller ships — between 400 gt and 5000 gt — would have to report their emissions under the Monitoring, Reporting and Verification regulation, and surrender allowances by 2027.

Offshore service vessels would be covered from 2024, and there are special conditions for ice-class ships and those servicing remote regions.

There would also be a scheme to cover ports just outside of the EU’s jurisdiction to stop ‘carbon leakage’ — ships using these ports to avoid the tax, following lobbying by the European Sea Ports Organisation.

Source: Lloyd’s List

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