A port in the storm
Cruise ships face carbon pricing, fuel intensity targets, and penalties for idling while docked
Welcome to Carbon Risk — helping investors navigate 'The Currency of Decarbonisation'! 🏭
If you haven’t already subscribed please click on the link below. By subscribing you’ll join more than 5,000 people who already read Carbon Risk. Check out the Carbon Risk backstory and find out what other subscribers are saying.
You can also follow on LinkedIn, Bluesky, and Notes. The Carbon Risk referral program means you get rewarded for sharing the articles. Once you’ve read this article be sure to check out the table of contents [Start here].
Thanks for reading Carbon Risk and sharing my work! 🔥
Estimated reading time ~ 9 mins
Almost 38 million people are expected to go on an ocean-going cruise in 2025, according to the Cruise Lines International Association (CLIA). That’s up 7 million (almost 20%) from 2023, the first year to see passenger numbers surpass pre-pandemic levels.
Today there are around 515 cruise ships dotted around the globe, more than double the number that traversed the oceans in 2000. There are more ships now, but they are also much larger than ever before. The biggest cruise ships are typically twice as big as those that sailed 25 years ago. The largest cruise ship, the Icon of the Seas, weighs in at 248,700 gross tonnes and carries 7,600 people.
More passengers, and more big ships, means more emissions. Analysis by Transport & Environment (T&E) found that cruise ships operating within European sovereign waters emitted 8.1 Mt CO2 in 2022, an increase of 17% from 2019. It’s not just CO2 though. Harmful pollutants such as sulphur oxides (SOX), nitrogen oxides (NOX), and fine particles (PM2.5) have also increased sharply, up 9%, 18%, and 25%, respectively (see Blue sky thinking: As climate policy splutters, governments should sell the benefits of clean air).1
Up until recently the cruise liners have operated without fear of paying a price for their pollution.
Indeed, they barely pay any tax at all, utilising old-loopholes that shelter them as foreign entities. They are exempt from paying tax on marine fuel and avoid paying anything more than a notional amount of corporation tax. Operating out of the purview of any one nation, the cruise liners are masters at minimising their tax burden.
Nevertheless, things may now start to change as both European and international climate regulations begin to bite.
For example, the maritime sector has been included in the EU emissions trading scheme since 2024. Ships travelling within the EU are required to pay for all of their emissions, while for voyages to or from a non-EU destination, half of the emissions are covered. Vessel operators including owners of cruise ships need to purchase EUAs amounting to 70% of their emissions in 2025 (up from 40% in 2024), and then cover 100% of their emissions in 2026 (see Putting a cap on European shipping emissions: The maritime sector is beginning to price in EU carbon prices).2
The EU ETS only covers emissions from the last port of call with passenger movement before entering European waters. So for long-haul cruises such as those crossing the Atlantic from the Caribbean to Europe, liners will try and minimise their emissions reporting exposure by including intermediate stops at nearby ports such as Southampton in the UK, or Casablanca in Morocco.