European Emissions Trading System – Update and Cost Impact
We feel that it is time to share with you the latest developments on the inclusion of shipping into the European Union Emissions Trading System (EU ETS), and the likely cost impact of compliance:
By vote of the EU parliament , all shipping in and out of Europe will finally become part of EU ETS as from January 2024 as part of the EU Fit - for- 55 package.
All ship owners, including Seatrade, will purchase and surrender ETS emission allowances, or EU Allowances (EUAs), for each ton of CO2 emissions reported under the scope of the system. Seatrade has fully complied with all EU MRV (Monitoring, Reporting, Verification) requirements to date and will also fully comply with the new requirements of the EU ETS.
You will soon find a detailed explanation of the process, including relevant l inks to the pertinent legislation on our website www.seatrade.com
The application of this system for extra -EU voyages shipping from the banana producing countries includes the obligation to hand over EUA corresponding to 50% of the CO2 emissions for inbound and outbound EU voyages. In addition, 100% of the CO2 emissions at berth in EU ports will be covered by EUAs.
Seatrade anticipates that compliance costs for our services will be in line with those of other (container) ship operators. The basic calculation is identical for every ship, specialised reefer or container or any other ship type:
ETS = VLC x F x EUA / CAP
Which in words means: ETS Surcharge = Voyage leg consumption x Factor for co2 emit ted per ton of fuel consumed x EUA price / Carrying capacity of the ship performing the voyage.
As example for bananas:
The inbound voyage leg consumption of a specialised reefer over a direct 14 days banana voyage is about 500 mtons of fuel oil of which 50 per cent will count on a voyage from extra EU port to EU ports, so 250 mtons are relevant for this purpose (VLC) .On this figure, the consumption in EU ports has also to be considered.
The Factor (F) of CO2 is a constant of about 3.2 mtons CO2 per mton of fuel consumed, IMO website reference.
The price for EUA ’s is a variable price, set at the European Energy Exchange EEX through a clearing auction. Annually, the number of allowances available will decrease. The price of EU emission allowances (EUA) has been volatile throughout 2022, ran gin g between €60 - 100, and is set at €88 today.
The carrying capacity of our biggest ships is about 9000 pallets, all told (CAP) .
On this basis, the full compliance cost per pallet will be in the region of 250 mtons x 3.2 mtons x €88 / 9000 pallets = €7.82 per pallet for the sea passage.
The EU has agreed to gradually include shipping in the EU ETS during a three-year phase in period, this means that for 2024, 40 % of emissions must paid, for 2025 70% and as from 2026 100 %.
Therefore, we foresee today – strictly indicatively and without guarantee - a compliance cost for the sea passage per pallet of €3.12 for 2024, €5.48 for 2025 and €7.82 as from 2026. Some of these assumptions will need fine- tuning and the price for EUA can fluctuate. A transparent and understandable mechanism will be proposed and periodically reviewed, and a charging structure will have to be agreed in due course to compensate for the new costs.
In the meantime, Seatrade remains fully commit ted to total compliance and gradual emissions reduction, not limited to
◦ Retrofit ting design and technology measures that boost efficiency across our fleet
◦ service architecture optimisation to minimise service emissions
◦ increased use of transitional lower carbon fuels, where available
◦ fleet renewal with future proof vessels
and we will not cease to continue to offer the services that our clients expect .
Please do not hesitate to contact us with any quest ion that you may have. We are looking forward to hearing from you.!
Seatrade Group NV,
as agents to disponent owners.