EU parliament backs maritime, road emissions in ETS

Market: Biofuels, Emissions, Natural gas, Oil products
22/06/22

Commercial road transport and all ships over 400 gross tonnage, including vessels servicing offshore oil and gas facilities, should be subject to the EU's Emissions Trading System (ETS), according to a draft legal report approved today by the European Parliament.

Consumption of biofuels, LNG and other alternative marine fuels should also entitle shipping firms to a number of free ETS allowances, parliament said.

"Ships often burn very harmful fuels and have hardly been subject to European environmental and climate protection legislation," said German centre-right EPP lawmaker Peter Liese. "It is important that the revenues from emissions trading do not disappear in the general budget, but are made available to the industry for investments in clean ships and corresponding infrastructure in the ports," he added.

Liese, who will lead parliament's negotiations with EU member states over a final legal text, also confirmed parliament's support for including commercial road transport and heating fuels in emissions trading from 2029. Parliament is expected to publish the text of specific amendments to the ETS concerning biofuels, LNG, maritime emissions, as well as inclusion of road transport and heating fuels, on 23 June. A majority in parliament previously approved the specific amendments on 8 June, but parliament as a whole initially rejected the overarching legal report on ETS reform due to internal political differences.

Today's vote reopens the path for negotiations between EU member states and parliament over a final legal text after the summer. Parliament is eyeing inclusion of 50pc of the maritime sector's greenhouse gas (GHG) emissions in 2024-26. From 1 January 2027, it wants coverage to be 100pc and to include GHGs beyond CO2, notably methane and nitrous oxide, for ships entering and leaving European ports.

If and when EU member states agree to adopt it as EU law, shipping companies could receive a number of free allowances corresponding to GHG emissions saved through consumption of alternative marine fuels such as LNG until 31 December 2030 and only to the rate of 50pc, as well as for an indefinite period and to the rate of 100pc for consumption of sustainable biofuels, biogas, renewable fuels of non-biological origin and recycled carbon fuel.

Ice-class exemption

Under parliament's amendments, shipping firms could also surrender an "adjusted" number of allowances for ice-classed vessels. Similarly, parliament wants a derogation from ETS obligations for emissions from maritime voyages to and from the "outermost" regions or to and from EU islands due to their dependency on maritime transport for imports of raw materials, essential goods and other products.

The European Community Shipowners' Associations (ECSA) has welcomed these provisions. It also underscored parliament's wish to create a sector-dedicated fund earmarking 75pc of revenues generated by shipping ETS allowances for the sector's energy transition.

"European shipowners welcome the increased climate ambition. We have criticised the lack of consistency and have put forward workable solutions," said ECSA secretary-general Sotiris Raptis, adding that earmarking ETS revenues for shipping is a "prerequisite for financing the uptake of cleaner fuels".

Non-governmental organisation Transport & Environment (T&E) has criticised the exemptions for ice-classed vessels and trips to outermost regions, adding that parliament has further "watered down" the European Commission's original July 2021 proposals, by voting to exclude fuels privately consumed in road transport and buildings until 2029. Although it is fair to make commercial users transition faster, 2029 is too late to start including households, according to T&E.

Under parliament's draft, emissions trading for housing and road transport fuels would start in 2025 for entities supplying these fuels for commercial consumption only. Subject to assessment by 1 January 2026, and "if the conditions are right", the commission should then "aim" to extend the ETS to cover private consumption of fuels in road transport, private heating and cooling of residential buildings from 1 January 2029, the draft states.

By Dafydd ab Iago and Sheel Bhattacharjee

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