EU Implements Emissions Charges for Ships to Combat Climate Change

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Starting in January, ships transporting goods in and out of the European Union will be subject to hefty emissions charges as they join the bloc’s Emissions Trading System. The move is part of the EU’s efforts to tackle climate change and reduce carbon emissions from the maritime industry, which accounted for over 1 billion tons of CO2 in 2018. Major freight companies like MSC Mediterranean Shipping Company and A.P. Moller-Maersk could face costs running into hundreds of millions of dollars. However, the fees may not be high enough to immediately incentivize a shift to cleaner marine fuels.

The cost of emissions for a single container ship sailing between Europe and Asia could amount to about €810,000 ($864,500) next year, assuming a carbon market price of €90 per ton. While the emissions system will encourage fuel efficiency, it may still be more cost-effective for shippers to use polluting oil-based fuels and pay for the emissions rather than switch to more expensive marine biofuels. However, as the number of emissions allowances available to buy decreases, carbon prices are expected to rise, making the system more effective.

In addition to the Emissions Trading System, the EU will also implement the FuelEU Maritime regulation in 2025, which sets maximum limits on the annual greenhouse gas intensity of energy used by vessels. These stricter rules and regulations aim to drive shippers towards cleaner fuels and further reduce emissions from the maritime industry.

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