Shipowners and European Ports Criticize Amendments to EU ETS

Organizations representing both European shipowners and ports are voicing their disapproval with sections of the new proposals for the European Union’s pending legislation to launch the Emissions Trading System (ETS) that was outlined as part of the Fit for 55 climate and energy reforms. First released in July 2021, the proposal has been controversial, with the World Shipping Council now saying the latest amendments would corrupt the ETS while the European Sea Ports Organization says the effectiveness of the policy would be undermined by the proposed changes.

German lawmaker Peter Liese recently released a series of proposed amendments to the drafts saying that the changes would both increase accountability for the maritime industry and accelerate some of the critical elements of the plan. His goal was strengthening the cap-and-trade emissions program with stricter carbon limits, a gradual phase-out of free emissions permits, and greater accountability for the shipping industry. 

The amendments touch on many elements of the program for example calling for a shorter phase-in period for reporting to 2025 and widening starting in 2026 the scope of Greenhouse Gases which the shipping industry would be required to monitor and report on. Some of the elements that drew immediate attention were proposed changes to the definitions of a shipping company to include time charter and more responsibility for those that choose the route, speed, and fuel employed by the ships.  Other recommended amendments address voyages and how non-EU voyages and ports are handled while also proposing a fund to support R&D into decarbonization.

With the European Parliament’s Industry Committee set to begin discussions on proposed amendments this week, the World Shipping Council released its comments saying that it believes the latest elements would “put the Green Deal at risk.”

“The proposed changed definition of responsible entity would corrupt the ETS,” writes the WSC in its comments. “The proposed amendments are intended to shield shipowners from ETS costs and then provide them with front-of-line access to ETS revenues such as the Ocean Fund. This would corrupt the whole idea of the ETS, changing it from a polluter-pays policy to a system where the polluter-gets-paid, and vastly reduce its effectiveness.”

The WSC emphasizes its belief that decarbonization is a shared responsibility. “Ship greenhouse gas emissions result from the combination of design technology, fuel consumed, and operational practices. It’s obvious, frankly, that one cannot decarbonize shipping without addressing the ship itself. A regional EU ETS carbon price must apply to all parties who have a role in GHG reductions– shipowners and operators,” says John Butler, President & CEO of WSC.

The WSC also attacks the concept of moving to bilateral deals with nations to extend carbon pricing for routes serving Europe. Earlier there had been criticism that the EU was overreaching in attempts to create global mandates, but the WSC responses to the new amendments calling them a distraction that would undermine progress toward global policy at the IMO.

The European Sea Ports Organization also points to the bilateral approach and focus on ships coming to the EU saying that ships would be able to undermine the policy through rerouting of their business. They point out that the amendments focus on intra-EU voyages and emissions at berth and only half for voyages incoming and outgoing voyages extra-EU. 

“Due to the limited scope of the current ETS proposal, ships can find ways to avoid falling in the scope of the EU ETS, by rerouting and calling, where possible, at non-EU neighboring ports in order to minimize costs,” write the ESPO. “Evasive port calls at neighboring non-EU ports could seriously jeopardize the effectiveness of the maritime ETS, as it would not reduce total shipping emissions. It could even increase overall emissions, in particular when evasion leads to longer voyages.”

While the WSC focuses its criticism to provide better, shared responsibility by reducing the loopholes, the ESPO wants the scope of the legislation expanded to eliminate the opportunities to avoid inclusion through voyages to non-EU ports. Both organizations call for more emphasis to push the International Maritime Organization for a more inclusive global policy.

Experts point out that is just the next step in a process that will evolve. The EU discussions will continue into February when comments and further proposed amendments are due. A final vote on the amendments is not expected till June 2022.