European Parliament passes ETS shipping changes

The June 22 vote also adopted positions on a carbon border tax and a social climate fund, forming the three key pillars of the “Fit for 55” package.

The proposals will then be negotiated with member states, a process that could prove difficult as Europe grapples with rising energy prices, high inflation and war in Ukraine.

The European Community Shipowners’ Association (ECSA) welcomed the support of the European Parliament for the ETS, in particular the Ocean Fund and the passing on of the costs of the ETS to ship operators.

Parliament’s position would create a shipping industry fund to invest 75% of ETS revenues generated by shipping to support the sector’s transition to greener energy. The pass-through would make the commercial operators of a vessel contractually liable for the costs of the ETS, subject to certain frictions between owners and operators.

The EU ETS is expected to enter into force in January 2023 with an adjustment period of four years. For maritime transport, the ETS will cover 50% of emissions from travel to and from third countries during the transition period, and 100% of these emissions from January 2027. Parliament also rewrote a phased transition for shipping companies over the four-year period, instead opting for payment of 100% of compensation due from January 2024.

“The Parliament’s vote is a strong signal that European policy makers are listening to us and taking into account the proposals of our sector. We need everyone on deck and the role of commercial operators is key to reducing emissions,” said ECSA Secretary General Sotiris Raptis.

“Assigning revenue to shipping is a prerequisite for financing the adoption of cleaner fuels. This is a watershed moment for decarbonizing shipping and making the sector competitive,” Raptis said.

The latest vote follows a tense vote on June 8, in which the ETS was voted down after attempts to water it down, and members jeered and booed in the chamber.