Ships sailing to European ports will be required to pay a combined carbon emissions tax of US $3.6 billion next year. This is the beginning of a fee that will almost surely increase as the region intensifies its efforts to tackle climate change, Bloomberg highlights.
As informed, the figure is an estimate of the total price of complying with the European Union’s Emissions Trading System (ETS) from Drewry Shipping Consultants.
Under the regulation, which takes effect January 1, vessels going into and out of EU ports must pay for their carbon pollution, affecting deliveries of everything from container loads of finished goods to the liquefied natural gas needed to keep homes warm in winter.
Even though the charge is in the billions, it represents a small portion of the money made from overseas shipping and is not expected to have a significant effect on the final prices that customers pay for items.
Furthermore, based on a recent estimate from the maritime classification society DNV and an assumed carbon price of 90 euros per tonne, a container ship travelling between Europe and Asia may be charged around 810,000 euros (S$1.18 million) under the ETS in 2024.
According to Stijn Rubens, a senior consultant at Drewry, it is doubtful that clean alternatives like green methanol would be able to compete with fossil fuels on pricing in the near future due to the new regulations.
Even if the cost of green fuels halves in the next three years, there is more taxation required to level the playing field,” he said. “Green methanol is likely to remain at a considerable cost disadvantage until at least 2026.
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Despite the ETS making up a small part of freight costs, there has already been talk of how traders and companies could exploit loopholes to avoid paying the fees.
Last month, six EU members, mostly those bordering the Mediterranean Sea, expressed worry about shipping potentially avoiding ETS taxes by mooring at nearby but non-EU ports. In order to deter evasion, the bloc has previously declared that Tanger Med in Morocco and East Port Said in Egypt should be recognised as “neighbouring container transshipment ports.”
