Shipping in the EU emissions trading system: implications for mitigation, costs and modal split
Creators: name: Flodén, Jonas
name: Zetterberg, Lars
name: Christodoulou, Anastasia
name: Parsmo, Rasmus
name: Fridell, Erik
name: Hansson, Julia
name: Rootzén, Johan
name: Woxenius, Johan
Publisher: name: Taylor & Francis
Year: 2024
Subjects: subject: Biophysics
subject: Medicine
subject: Environmental Sciences not elsewhere classified
subject: Sociology
subject: FOS: Sociology
subject: Information Systems not elsewhere classified
subject: Science Policy

description: EU recently decided to include shipping, meaning all intra-European shipping and 50% of extra-European voyages, in the EU Emissions Trading System (ETS) beginning in 2024. This article provides an early assessment of the impacts of the EU ETS on the shipping sector’s potential reductions in greenhouse gas emissions for different types of ships. It further examines selected mitigation measures and the impact on modals split and costs. The study employs a mixed-methods approach combining quantitative estimates (based on data from the EU monitoring, reporting and verification system) with qualitative data and information from interviews with key actors and from previous literature. This approach aims to provide a comprehensive understanding of the impacts of the EU ETS. The inclusion of shipping in the EU ETS is expected to introduce significant incentives to reduce emissions. We estimate that switching to bio-methanol at an emissions allowance price of €90–100/tCO<sub>2</sub> will be cost-effective for a minor share of shipping segments (representing about 0.5-5% of all ships), whereas at a price above €150/tCO<sub>2</sub> it could be cost-effective for a considerable share (potentially 75%) of ships. In the short term, the costs incurred by the EU ETS will be passed on to transport customers as a surcharge. The increased cost may, unless properly addressed, drive carbon leakage. Meanwhile, a modal shift away from shipping may occur in the roll-on, roll-off (RoRo) and roll-on passenger (RoPax) segments due to direct competition with road and rail transport and the relative ease of shifting to other modes of transport. Integrating shipping into the EU ETS is an important step towards reducing GHG emissions in the sector but also will reduce emissions of NO<sub>X</sub>, SO<sub>X</sub>, and PM.CO<sub>2</sub> emissions from shipping constitute about 8% of GHG emissions from all sectors in the EU ETS.The need to purchase allowances will increase operating costs, which will initially be passed on to transport customers as a surcharge.Interviews confirm that a modal shift away from shipping to road and rail may occur in the RoRo and RoPax segments.Switching to bio-methanol may be cost-effective mainly for some ships in the RoRo, RoPax and reefer segments at an allowance price below €100/tCO<sub>2</sub>, while for most ships (about 85–100% of ships) it will be cost-effective above €200/tCO<sub>2</sub>. Integrating shipping into the EU ETS is an important step towards reducing GHG emissions in the sector but also will reduce emissions of NO<sub>X</sub>, SO<sub>X</sub>, and PM. CO<sub>2</sub> emissions from shipping constitute about 8% of GHG emissions from all sectors in the EU ETS. The need to purchase allowances will increase operating costs, which will initially be passed on to transport customers as a surcharge. Interviews confirm that a modal shift away from shipping to road and rail may occur in the RoRo and RoPax segments. Switching to bio-methanol may be cost-effective mainly for some ships in the RoRo, RoPax and reefer segments at an allowance price below €100/tCO<sub>2</sub>, while for most ships (about 85–100% of ships) it will be cost-effective above €200/tCO<sub>2</sub>.