Putting a cap on European shipping emissions
The maritime sector is beginning to price in EU carbon prices
“God must have been a shipowner. He placed the raw materials far from where they were needed and covered two thirds of the earth with water." - Erling Naess, Norwegian shipping tycoon
Responsible for sending around 3% of global greenhouse gases into the atmosphere, the shipping sector emits more than the aviation industry, and about the same as the Japanese economy.
Shipping is yet another very hard to decarbonise sector of the global economy.
Maritime emissions are forecast to increase over the next few decades as global trade in energy, commodities and goods continues to grow. Seaborne trade in tonne-miles is projected to increase by almost 30% between 2022 and 2050, according to risk management and assurance firm DNV.1
Most of this growth is expected to come this decade, after which global seaborne trade growth is likely to gradually stabilise. Growth will probably come from LNG (up 160%) and container shipping (up 77%). In the longer term, DNV expects peak demand for coal and oil, and declining associated seaborne trade for these commodities, to mean that overall shipping volumes stabilise by 2050.
However, there is considerable uncertainty as to how global maritime trade will play out. DNV’s forecast is on the extreme low side compared with other recent forecasts. For example, the International Maritime Organization’s (IMO) Fourth GHG study 2020 projects that by 2050 seaborne trade could increase by between 40% and 115%, while the OECD International Transport Forum (ITF) forecasts that trade could rise by 150% by 2050.
Shipping to face EU carbon market from 2024
Beginning in 2024, the shipping sector will be subject to carbon pricing for the first time.
In the last couple of weeks a preliminary agreement has been reached on how the EU ETS would be extended to the maritime sector. Vessel operators will need to purchase EUAs amounting to 40% of their emissions in 2024 (payable by April the following year), 70% in 2025, and reaching 100% of 2026 emissions, according to the announcement by the European Parliament.