Shipping polluters finally set to pay as European Parliament Committee approves ambitious carbon market

May 13, 2022

Parliament is set to adopt ambitious carbon pricing for shipping

One year after the European Commission’s landmark climate package, ‘Fit for 55’, it is now in the hands of the European Parliament (EP). We look at what is at stake for the European Green Deal and Europe’s climate ambitions, as the lead committees of the EP vote to adopt key Fit for 55 proposals.

20 years after committing to regulate shipping emissions at the EU-level, the European Commission’s proposal to include shipping in the EU’s emissions trading system (ETS) is finally on the European Parliament’s table.

The ETS is the cornerstone of the EU’s climate policy. It is based on a very simple principle: you pay for every tonne of greenhouse gas emissions you pollute. No more, no less. This hugely important principle – that the ‘polluter pays’ – has, for far too long, been absent from the shipping sector.

But while the ETS will be important in internalising the external cost of shipping pollution, the price differential between conventional dirty fuels and clean e-fuels is far too great to be covered by predicted ETS prices. Therefore, other legislation is needed to mandate clean fuels and the ETS will be important for the revenues it generates that must be channelled to clean shipping technology.

The Commission proposal was a good step forward, notably for its geographical scope. However, it contained a number of significant flaws. The Commission proposed to exempt greenhouse gases (GHGs) other than CO2 from ships under 5,000GT and ship types that do not carry cargo or passengers (such as fishing or offshore vessels). Funds are also not guaranteed for ‘Carbon Contracts for Difference (CCfDs)’, an effective subsidy instrument to fund clean fuels at the price of conventional ones. 

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