On 18 March, the Commission adopted its first report on the implementation of the EU Emissions Trading System (ETS) extension to maritime transport, which began on 1 January 2024.
As stated, the report provides an initial analysis of the impacts of this recent policy development that covers around 12.000 large ships and is key to ensure the fair contribution of shipping to the EU’s climate objectives.
The report looks specifically into the potential risk of evasion and circumvention. However, it does not find any evidence of major changes in the market being directly attributable to the introduction of the EU ETS. For instance, the analysis of traffic data does not show evidence of a general trend in relocation of container transhipment activities, nor does it bring to light any clear evidence suggesting that shipping companies are adding stops at neighbouring non-EU ports.
Furthermore, the data provides no evidence of a modal shift towards road transport or an increase in the use of smaller ships, which might have suggested evasive behaviour. Forward-looking indicators, including route announcements and planned investments in ports, similarly reveal no discernible trends indicating a general change in market behavior due to the ETS extension, despite identifying a few isolated cases of potential circumvention. Furthermore, the report finds no evidence of reduced shipping services to EU islands or outermost regions.
Limitations of the analysis are also highlighted in the report (e.g. impacts of the Red Sea crisis on maritime traffic, limited time of application of the ETS to the sector, or data availability) as well as the need to cautiously interpret its findings.
Main risks and concerns related to the ETS extension to maritime transport emissions
As commercial agents competing in a global market, shipping companies are expected to adopt measures to increase their competitiveness and minimise their costs, including ETS compliance costs. To achieve this, companies may typically consider implementing operational solutions to reduce their GHG emissions, such as slow steaming, route optimisation, or using renewable and low-carbon fuels or investing in cleaner ships and energy efficient retrofits (e.g. wind propulsion assistance, improved hull design, etc.).
However, companies may also consider implementing practices that could be considered as evasive behaviours.
Evasive behaviours from shipping companies are problematic in three ways:
- Evasive behaviours can undermine the environmental integrity of the EU ETS system by reducing the surrender of ETS allowances without actually lowering emissions. In some cases, they may even increase GHG emissions by altering transport routes or shifting to higher-emission transport modes.
- Some evasive behaviours may decrease traffic and connectivity at EU container transhipment hubs, leading to negative macroeconomic effects, such as reduced or more expensive access to overseas markets and fewer opportunities for cargo forwarding.
- Evasion mechanisms can reduce ETS revenues, limiting the funds available for supporting the decarbonisation of the maritime transport sector and broader climate objectives.
To mitigate evasion risks, the ETS Directive includes a strict “port of call” definition, which prevents companies from making artificial port calls for evasion purposes and excludes “neighbouring container transhipment ports” from this definition. This reduces the incentive to stop at non-EU hubs before or after EU port calls.
Furthermore, the Commission has identified such neighbouring transhipment ports, including East Port Said in Egypt and Tanger Med in Morocco, which account for around 70% of transhipment activities in non-EU Mediterranean countries, with updates to the list every two years.
Beyond evasion, there is concern that increased shipping costs due to ETS compliance may be passed on to consumers, potentially affecting EU outermost regions and remote territories, which rely heavily on maritime transport for connectivity.
The Directive already includes specific measures to mitigate potential impacts on connectivity of remote regions by exempting specific voyages until 2030 including:
- Voyages between a port in outermost regions and a port within the same Member State;
- Certain voyages by passenger ships between a Member State with no land connection and another closest Member State in the context of a transnational public service contract/obligation (PSC/PSO)11;
- Certain voyages by passenger ships between ports in Member States’ islands (with no road or rail link with the mainland) with fewer than 200 000 permanent residents12 and other ports within the same Member State.
