Shipping: Carbon leakage risk in the Baltic region

The European Commission has committed to including the maritime sector in the bloc’s already existing carbon pricing scheme. This has led to carbon leakage – where vessels make evasive port calls to avoid the extra environmental charge – being raised as a potential problem.

T&E looks in detail at the factors involved in an eventual carbon leakage risk. It analyses international maritime traffic arriving at and departing from five Baltic Member States and evaluates the risk that vessels trading outside Europe will stop in a non-European port without environmental regulation – in this case the Russian Baltic port of Ust-Luga – in order to drive down their overall costs. The analysis studies the cost factors (operators’ earnings, fuel costs, opportunity and port costs) that influence evasion risk at different carbon prices and geographical scopes. Granular analysis then looks in depth at particular case studies to evaluate how the chances of compliance depend on specific factors such as ship class, overall distance length and the location of the port of call.