Transport and Environment (T&E) has issued a study that examines the impact of the EU’s Emissions Trading System (ETS) to global shipping.
According to T&E, the ETS has a limited negative impact on Small Island Developing States (SIDS) and Least Developed Countries (LDCs) and could potentially provide a net gain to those countries if the EU extends its carbon pricing mechanism to all ships calling at European ports, with the additional revenues being distributed as climate finance.
Key findings
- The EU ETS will have a very limited impact on SIDS and LDCs. The largest impact will be in a handful of West African countries, for whom between 15 and 19% of their total shipping traffic will be regulated by the ETS, while the impact will be zero or close to zero on shipping trade to the Asian and Pacific SIDS and LDCs.
- Extending the ETS to the emissions the EU currently monitors but doesn’t price could significantly contribute to climate finance. In 2030, we find closing exemptions (such as those for smaller ships or for ice-class ships) and extending the ETS to cover all EU voyages (that is, 100% of voyages between EEA and non-EEA ports, as opposed to 50% currently) would raise enough revenue to cover 20% of the EU’s share of the global 100 billion (USD) climate finance goal.
- By applying the EU ETS to voyages past ports in selected neighbouring countries, the EU could increase climate ambition while also generating revenue for those neighbouring countries, without them having to set up their own shipping carbon markets. Through such a system, which we call ‘ETS-as-a-service’, the UK could regulate 59% of its shipping emissions; Morocco, 57%; Egypt, 41%; and Turkey, 30%.
According to the report, by extending the ETS to cover all emissions currently monitored but not priced, the EU could meet 20% of its global climate finance obligations annually.
The study also proposes an ‘ETS-as-a-service’ system, allowing neighbouring countries like the UK, Morocco, Egypt, and Turkey to benefit from the EU’s shipping ETS, reducing the need to establish their own systems.
Finally, regional measures like the shipping ETSs can sit alongside global policy like a shipping levy with joint benefits of emission reduction and revenue generation for climate-vulnerable regions, T&E concludes.
