EU to include shipping in carbon market

BRUSSELS/LONDON • Shipping will be included in Europe's emissions trading system (ETS) and costs for polluters are set to rise under Brussels' plans to meet the European Union's (EU) climate targets, said the European Commission yesterday.

The EU ETS, which forces emitters to pay for each tonne of carbon dioxide they generate, is the keystone of an EU drive to cut net greenhouse gas emissions by 55 per cent from 1990 levels by 2030.

Manufacturers, power firms and airlines operating flights inside Europe are already covered by the scheme but, under plans unveiled by the Commission yesterday, shipping would be phased into the ETS over a three-year period.

Emissions from sea voyages within the EU, plus 50 per cent of ships' emissions from international voyages starting or ending in the EU, would fall under the existing ETS, plus emissions that occur when ships are at berth in EU ports.

Emissions from road transport and from heating systems in buildings would need to comply with a separate ETS from 2026.

The commission has proposed that 25 per cent of revenues generated from permit sales in the new ETS would go into a fund to shield low-income households from the carbon costs.

The EU now gives many free carbon permits to industries to help them compete with overseas firms that do not pay carbon costs.

Under the new proposals, likely to be opposed by many industries, from 2026, this would be phased out for sectors covered by the EU's planned carbon border tax on CO2 emissions embedded in imported goods such as steel and cement.

From 2026, the EU will also shrink the number of permits it gives to other industries.

Companies that have received free permits would be expected to pay for a steadily increasing portion of their emissions by buying permits, which have this year soared to record highs of more than €58 (S$93) per tonne and now trade around €54.30 per tonne.

Airlines' free CO2 permits would be phased out by 2027. Airlines currently receive most permits for free.

The measures are all likely to push up prices, with some analysts forecasting that EU carbon prices will reach €90 per tonne by 2030.


A version of this article appeared in the print edition of The Straits Times on July 15, 2021, with the headline 'EU to include shipping in carbon market'. Subscribe