EU Climate Law
Impact of Green Deal and Fit for 55 package for the shipping sector
Climate change and environmental degradation are an existential threat to the world. To overcome these challenges, the European Green Deal was presented end of 2019. This Deal is a growth strategy to transform the EU into a climate neutral and circular economy by 2050, while preserving Europe’s competitiveness. In this article we would like to inform you about the operational and financial impact of this plan on the shipping sector and its stakeholders.
BigLift strives to reduce its emissions to reduce the impact on the environment. We welcome clients who want to work with us to reduce the emissions of transportation.
Fit for 55 plan
To achieve climate neutrality in 2050, the European Commission has adopted a set of proposals to make the EU’s climate, energy, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. This package of proposals is called the 'Fit for 55' package.
Naturally, the shipping industry is also included in this package. The upcoming regulations aim to push the shipping sector to more sustainable transport. We welcome these new regulations as they will close the gap between fossil fuels and more sustainable fuels. On the other hand, we face a challenge, because of the large impact these regulations have on global shipping. For example: enforcement is crucial to ensure fair competition, since the overall cost increase for shipping companies is considerable.
EU Emissions Trading System
As part of its Fit for 55 package, maritime emissions will be included from 1 January 2024 in the EU ETS, a trading system for emissions allowances, which has been in effect since 2008. At the outset, the directive will only apply to vessels over 5,000 gross tonnage, which means that it will affect all vessels of BigLift’s fleet.
The main regulation imposed by the EU ETS with regard to shipping is that shipping companies must acquire and submit allowances for their carbon dioxide (CO2) emissions, for all emissions on trips between EU and EEA ports (including emissions while ships are at berth), as well as 50% of the emissions from trips between the European Union or the EEA and third countries. If a company does not have enough allowances, it will be sanctioned. One likely sanction is that the company will have to pay an excess emissions penalty of €100 per tonne for unaccounted emissions.
The EU ETS's application to shipping will follow a staggered approach. Shipping companies must submit allowances for 40% of their emissions in 2024, rising to 70% in 2025. The directive will apply in full force in 2026. From 2026, shipping companies will also have to submit allowances for emissions of methane and nitrous oxide, in addition to CO2.
Cost increase
Currently one emission allowance costs around € 80. This means that for a shipment between European ports € 32 of additional costs per emitted tonne will be charged in 2024, € 80 in 2026. As a reference: one tonne of HSFO emits just over 3 tonnes of CO2. These additional costs will have a large impact on the shipping rates.
Fuel EU Maritime Directive
Also on the agenda is the Fuel EU Maritime. This regulation is set up to stimulate the use of sustainable fuels. Although still under discussion, this regulation is planned to come into force in 2025. To motivate the use of more sustainable fuels, the EU will set a limit to the annual average greenhouse gas intensity of the fuel burned by our vessels. This results in a maximum amount of Well to Wake CO2 equivalent emissions allowed for the amount of energy used on the fleet. Synthetic or bio-fuels have to be blended with fossil fuels, which will reduce the CO2 emissions per mt fossil fuel, but which will also result in an increase in price. We support these measures, and it is up to us as a shipping company to reduce our CO2 emissions as much as possible, but we can only achieve this in close cooperation with our clients. Only then will we be able to achieve an optimum of performance and emissions. We kindly invite you to contact us via sustainability@spliethoff.com in case you have any questions, ideas or remarks.