Prepare for new surcharge as EU tax shipping emissions

Container shipping lines will be introducing new surcharges from 2024 to cover the costs of the EU Emissions Trading System scheme and while some cost indications have been provided, there are many problems in calculating the “correct” surcharge.

The EU Emissions Trading System (ETS) was established in 2005 as a market-based mechanism to tackle greenhouse gas emissions within the European Union and from the start of 2024, the ETS will encompass shipping activities within the European Economic Area (EEA) with shipping lines required to monitor and report their emissions and surrender allowances for every ton of CO2e they emit.

A key problem is that the costs to be paid by the carriers is only known post-fact, which means they can only make assumptions upfront.

Unlike fuel surcharges, that are typically adjusted quarterly, carriers will report their emissions for the full-year 2024, then in September 2025, they will buy EU allowances for their emissions, at the price prevailing at that time. 

Hence the ETS surcharges carriers add in January 2024 will either be based on pure guesswork or based on the price in January 2024 which may, or may not, reflect the actual cost to be paid in September 2025, which means no transparency.

Maersk and Hapag-Lloyd have posted their indications, with Maersk indicating 70 EUR/FFE for Asia to N.Europe, while Hapag-Lloyd is indicating just 24 EUR/FFE, which underlines the concern that there’s going to be confusion across carriers, with nothing common aligned.

Note that the alignment part is no different for ETS, than it is for bunker surcharges. 

Under EU legislation the carriers are prohibited from aligning such surcharges, even though the foundation for the surcharge is exactly the same for all carriers and shippers.

Carbon pricing in the EU ETS is based on vessels and has extraterritorial application:
– 50% of emissions from voyages departing from an EU port to a non-EU port and vice versa
– 100% of emissions from voyages between EU ports
– 100% of emissions from ships docked at an EU port

To mitigate the risk of evasion and transhipment activities moving outside the EU, the law specifically targets non-EU ports near the EU with a high share of transhipment, with ETS effectively extending the length of voyages to address concerns about carbon leakage.

There will be a phased implementation, according to the following schedule:
– 2024; submit allowances for 40% of verified emissions
– 2025; submit allowances for 70% of verified emissions
– 2026 onwards; submit allowances for all verified emissions

We are closely following EU-ETS, the carriers adoption of cleaner fuel technology and any other initiatives which may impact, or offer cost and efficiency savings for our shippers.

We will keep you advise of important developments, but please do not hesitate to contact us now, if you have questions or concerns about any of the issues raised.