T&E: Exemptions would reduce the potential of the EU CO2 market to finance green shipping

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According to Safety4sea, in the original European Commission proposal, all ships under 5000 gross tons (GT) are exempt despite the considerable emissions coming from these ships. Also excluded are large emitting vessels servicing offshore oil and gas facilities. The proposal only covers carbon dioxide, which allows methane that leaks from LNG ships to escape.

“The ETS is a historic opportunity to tax pollution from ships and use that money to finance the decarbonization of shipping. Instead, a late addition to the carbon market for shipping risks giving a large and unjustified subsidy. to large companies,” said Jacob Armstrong, sustainable shipping officer at T&E.

The European Parliament removed most of the exemptions from the Commission’s proposal before the summer break, however EU member states have tabled a much less ambitious proposal. Spain and Greece, for example, are seeking exemptions for ferries to islands, while Finland wants to exempt ships sailing on ice.

Now, the Council’s position grants a total of €20 billion in additional exemptions between 2023 and 2030 compared to the EU executive body’s landmark proposal in 2021. The European Parliament’s position, on the other hand, would increase revenue at €43 billion, as T&E analysis shows.

Taking all of the above into account, a joint NGO letter urge that the gross tonnage threshold for the Monitoring, Reporting and Verification (MRV) Regulations, the Emissions Trading System (ETS) Directive and the Maritime Regulations FuelEU be reduced to 400 gross tons and that Ocean-going and service vessels are included in these laws.

#1 Green technology is ready: The range of boats, engines and technologies our industry has invested in clearly show that green shipping technology is ready. These projects are testing grounds for technologies that lower costs and pave the way for the commercialization of larger projects. All, however, currently need government subsidies to operate. Until we have an effective legislative framework for smaller ships, green shipping of all sizes will be undermined.

#2 Long-term investment decisions require predictability now: Businesses and financial institutions need predictability to invest. If a company does not know whether its investment in a zero emission vessel will pay off (ie avoiding a carbon tax or exceeding FuelEU Maritime compliance), it will refrain from investing in that vessel. Therefore, postponing the decision to include new vessels in the MRV and ETS, as the EU Council has proposed, will block investments and run counter to the intended objectives of the proposed legislation. This is problematic given that the average age of ships between 400 and 5,000 GT is 39 years, 7 years older than other ships, which means that renovations and/or modernizations of ships and propulsion systems will be urgently needed in a period of very short time.

#3 A level playing field means ending fossil fuel subsidies: Green ships will have a hard time competing commercially until the external costs of burning fossil fuels are internalized. In this context, exemptions for smaller ships, ferries and offshore vessels are a de facto subsidy for fossil fuels and continued pollution. Retaining the subsidy for fossil fuel ships will undermine competition and may even incentivize shipping companies to invest in fossil fuel ships to avoid legislation or modify their ship and reclassify it below 5,000 GT.

#4 The additional administrative burden is negligible: all shipping companies already monitor their fuel consumption for commercial reasons. This means that reporting emissions will pose a negligible administrative burden. In addition, the European Parliament has addressed concerns about administrative burden in the proposal to reduce monitoring requirements for ships under 5,000 GT to fuel consumption and fuel type.

#5 Ending the loopholes is a no-brainer for industry, climate and human health: emissions from ships exempted in the Commission’s proposals are significant: 25.8 MtCO2. Also, smaller ships tend to stay closer to shore, which means decarbonizing those ships will bring more benefits to human health than other ships. Supporting the decarbonization of smaller vessels will go hand in hand with reducing other pollutants. Assuming these ships use the same fuel mix as the rest of the fleet, they are responsible for approximately 17,000 tons of sulfur oxide, 180,000 tons of nitrogen oxide, and 7,000 tons of particulate matter (PM) (source: T&E) , all causing diseases. pollutants, meaning the runoff poses a serious risk to human health in coastal areas.

#6 Empowering European Green Companies: European companies mainly build smaller ships below and above 5,000 GT, while larger ships are more often built in East Asia. Europe is also a leader in terms of green technology, such as batteries, hydrogen and wind assistance. Therefore, the regulation of smaller ships would cause a boom in the European green shipping industry, especially for Europe’s shipyards and their marine equipment industry. Furthermore, given the massive and growing demand for offshore vessels to support the growth of offshore wind power, regulation of these vessels may precipitate green European production of such vessels. The inclusion of all these types of ships in the ETS would lead to a virtuous circle in which the EU reinvests revenues in the green European shipping industry.

We also attach the T&E Report on ETSs in maritime transport:

Source: Safety4sea

Source Safety4sea

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