CO2 cost could raise bunker price 25pc

Spanish Market: Emissions, Oil products
18/01/19

The implementation of a cap-and-trade system for greenhouse gas emissions from marine shipping could boost shipowners' bunker bills by 25pc at current price levels.

Shipping emissions of CO2 are not currently regulated, although the European Union (EU) has proposed plans to cover the sector.

Under the EU's Emission Trading System (ETS), companies receive or buy emission allowances, which they can trade with one another. In December, Argus-assessed ETS CO2-equivalent emission at $25.709/t, published in Argus' European Emissions Markets report. Since there are about 3.0-3.3t of CO2 in each tonne of marine fuel burned, CO2 emissions fees will raise the price of marine fuel by $77.13-84.84/t if the same ETS formula was adopted for marine shipping. Argus assessed high-sulphur 380cst bunkers at $342.68/t delivered in Rotterdam in December. In this instance, if ETS is applied, the bunker price would increase by about 24pc to about $426/t.

The latest emissions data from Maersk showed the Danish shipowner emitting 35.92mn t of CO2 equivalent in 2017. Assuming an ETS is implemented and Maersk's CO2 allowance is capped at half of its emissions, or 17.96mn t, then for the other half of its emissions at $25.709/t for CO2 equivalent, Maersk would be paying $461.74mn in CO2-equivalent fees.

There have been a number of options floated to reduce greenhouse gas (GHG) emissions from shipping, some of which shipowners have already implemented because they are economically feasible, including using fuel efficient vessels and traveling at lower speed. Some ports have given financial incentives to shipowners who choose to plug in their vessels into the ports' electrical grids to power their auxiliary engines instead of burning fuel while docked. Some shipowners have employed LNG, methanol or biofuels for bunkering.

But some economists believe that charging shipowners for CO2 emissions could be the biggest incentive for curbing those emisisons. In a working paper published in September 2018, the International Monetary Fund (IMF) examined carbon taxation on marine fuels. One of the scenarios explored included implementing a tax of $7.50/t of CO2 in 2021 and increasing the tax annually by $7.50/t, thus raising it to $75/t of CO2 by 2030 and to $150/t of CO2 by 2040.

The reduction of maritime shipping greenhouse emissions was omitted from the Paris Agreement in 2015, leaving it in the hands of the International Maritime Organisation's (IMO) Marine Environment Protection Committee (MEPC), which oversees global marine fuel regulations. Environmental groups have criticized the IMO for acting slowly on GHG reduction measures.

At its meeting in October 2018, MEPC did not agree on specific greenhouse gas action. At its next meeting in May 2019, IMO is considering an initial strategy to cut global shipping sector emissions by at least half by 2050 compared with 2008 levels. If the IMO does not deliver an international shipping deal by 2021, the EU has said it could include shipping emissions in its ETS from 2023. European shipowners largely oppose the EU's ETS plan, because they will be subjected to higher bunker costs compared with their international competition.

Since most ports, countries and shipowners do not collect or report bunker data, comprehensive information on global marine fuel sales has been limited. The first step to reducing emissions would be to collect data on bunker consumption and analyze it. Starting on 1 January 2018, the EU required vessels 5,000 gross tonnes (gt) and above calling ports in EU countries as well as Norway and Iceland to collect and report their bunker consumption to the EU. The data is compiled by the European Maritime Safety Agency and will be published every year starting in June 2019.

The IMO also began requiring vessels to collect bunker consumption data one year after the EU on 1 January 2019. The data collection applies to vessels 5,000gt and above, on all international voyages. The data is reported to the vessel's flag country, which in turn reports it to the IMO. The IMO will summarize the data in annual reports.

EU emission trading scheme CO2-equivalent $/t

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

09/04/25

Delta pulls full-year forecast amid US tariffs: Update

Adds details from earnings call throughout. Houston, 9 April (Argus) — Delta Air Lines pulled its full-year 2025 financial guidance today, citing US tariff-related uncertainty. "Given the lack of economic clarity, it is premature at this time to provide an updated full-year outlook," the airline said Wednesday in an earnings call. Delta said it hoped the growing US tariff war with the world would be resolved through trade negotiations, but that it also told its main aircraft manufacturer, Airbus, that it would not purchase any aircraft that includes a tariff fee. "If you start to put a 20pc incremental cost on top of an aircraft, it gets very difficult to make that math work," chief executive Ed Bastion said in an earnings call today. In the meantime, Delta is protecting margins and cash flow by focusing on what it can control, including reducing planned capacity growth in the second half of the year to flat compared to last year, while also managing costs and capital expenses, Bastion said. Delta expects revenue in the second quarter of 2025 to be either 2pc higher or 2pc lower from the year earlier period with continued resilience in premium, loyalty and international bookings offsetting softness in domestic and standard flights. Punitive taxes on imports from key US trading partners were implemented on Wednesday despite President Donald Trump's claims of multiple trade deals in the making. Trump's 10pc baseline tariff on imports from nearly every country already went into effect on 5 April. The higher, "reciprocal" taxes went into effect today, although at midday Wednesday he announced a 90-day pause on most of the higher tariffs, while increasing tariffs on Chinese imports even higher. The company reported a profit of $240mn in the first quarter of 2025, up from $37mn in the first quarter of 2024. Confidence craters in 1Q Corporate travel started the year with momentum, but a reduction in corporate confidence stalled growth in February and March, Delta said. For the first quarter, corporate sales were up by low-single digits compared to the prior year, with strength led by the banking and technology sectors. The company's fuel expenses were down by 7pc in the first quarter of 2025 compared to the prior year period. The average price Delta paid for jet fuel was $2.45/USG, down by 11pc to the prior year period. Delta said it has seen "a significant drop off in bookings" out of Canada amid the trade disputes with that country which started earlier than the broader US tariffs. Meanwhile, Mexico is "a mixed bag," the company said. Delta is considering reducing capacity levels in Mexico and Canada in the future. The company reported a profit of $240mn in the first quarter of 2025, up from $37mn in the first quarter of 2024. By Eunice Bridges Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Delta pulls full-year forecast on tariff uncertainty

09/04/25

Delta pulls full-year forecast on tariff uncertainty

Houston, 9 April (Argus) — Delta Air Lines pulled its full-year 2025 financial guidance today, citing US tariff-related uncertainty. "Given the lack of economic clarity, it is premature at this time to provide an updated full-year outlook," the airline said Wednesday in an earnings call. Delta said it hoped the growing tariff war woudl be resolved through trade negotiations, but that it also told its main aircraft manufacturer, Airbus, that it would not purchase any aircraft that includes a tariff fee. In the meantime, Delta is protecting margins and cash flow by focusing on what it can control, including reducing planned capacity growth in the second half of the year to flat compared to last year, while also managing costs and capital expenses, chief executive Ed Bastion said. The company reported a profit of $298mn in the first quarter of 2025, up slightly from $288mn in the first quarter of 2024. The company's fuel expenses were down by 7pc in the first quarter of 2025 compared to the prior year period. The average price Delta paid for jet fuel was $2.45/USG, down by 11pc to the prior year period. By Eunice Bridges Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

German coalition eyes 'limited' foreign carbon credits

09/04/25

German coalition eyes 'limited' foreign carbon credits

Berlin, 9 April (Argus) — The parties likely to form Germany's next government today presented their coalition treaty, which pledges to allow the use of foreign carbon credits to reach the country's 2040 climate target. The treaty, presented in Berlin by the four party leaders Friedrich Merz of the CDU — the likely next federal chancellor — Lars Klingbeil and Saskia Esken of the SPD, and Markus Soeder of the CDU's Bavarian sister party CSU, stresses the parties' commitment to German and European climate targets, the Paris climate agreement, and reaching climate neutrality in Germany by 2045 "by combining climate action, economic competitiveness and social balance, and by focusing on innovation". "We want to remain an industrialised country and become climate neutral," the treaty reads. The parties' support for the EU's suggested interim target to reduce its emissions 90pc by 2040 compared with 1990 levels is conditional on two points. Germany must not be expected to go beyond its 88pc reduction target for 2040 enshrined in the country's climate action law. And its companies must be allowed, with a view to reducing their residual emissions in an "economically viable" way, to resort to "permanent and sustainable negative emissions", and to "credible CO2 reduction through highly qualified, certified and permanent projects" in "non-European partner countries". Making use of the latter activities should be permissible for up to three percentage points of the 2040 reduction target, although the "priority" for companies will be to reduce carbon emissions. And allowing these options must be reflected in the European Climate Law and the EU emissions trading system (ETS), the parties stipulate. The treaty also underlines the importance of "effective" carbon leakage protection to preserve Germany's "industrial value creation". The treaty calls for the European Green Deal and Clean Industrial Act to be further developed to "bring competitiveness and climate action together", and stresses the importance of carbon pricing instruments, which more countries should be persuaded to introduce. The parties also flag the importance of social acceptance, advocating an "economically viable price development" and pledging to ensure the smooth transition of Germany's domestic carbon price for the heating and transport sectors into the EU ETS 2 on the latter's launch in 2027. The parties pledge "immediately" to adopt a legislative package that enables carbon capture, transport, use and storage (CCU/CCS), particularly for industrial emissions that are difficult to avoid, and also for gas-fired power plants — a disputed issue within the SPD, and the reason why CCS legislation did not pass under the outgoing SPD-Green-led federal government. The new government said it will legally enshrine the "overriding public interest" of the construction of CCS infrastructure, as well as pledging to give the "highest priority" to ratifying the [amendment to the] London Protocol, allowing cross-border CO2 transportation, and to enter bilateral agreements with neighbouring countries on storing carbon. The new government will enable CO2 storage offshore in Germany's exclusive economic zone and the North Sea, as well as onshore where geologically suitable and accepted. The parties see direct air capture as a "possible" future technology to "leverage negative emissions". By Chloe Jardine Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Keystone oil pipeline shut down after ND spill: Update

08/04/25

Keystone oil pipeline shut down after ND spill: Update

Adds latest pricing for US, Canadian sour crudes. Calgary, 8 April (Argus) — North American sour crude prices rose relative to their benchmarks today after the 622,000 b/d Keystone pipeline carrying Canadian crude was shut down following a spill in North Dakota. Canadian crude prices on either side of the spill diverged in Tuesday's trading, with Western Canadian Select (WCS) at Hardisty, Alberta, trading between a $9.15-11/bl discount to the CMA Nymex, with the midpoint representing a widening of about $1/bl day-over-day. WCS at the Texas Gulf coast was up by about 45¢/bl from its prior assessment, trading at a $2.60/bl discount to CMA Nymex. Fellow Canadian heavy sour Cold Lake meanwhile was up by a similar level, trading between $2.25-$2.65/bl discounts against CMA Nymex. The Keystone system is a major route for Canadian heavy crude destined for both the US midcontinent and the Gulf coast. Pipeline operator South Bow initiated a shutdown at 8:42am ET Tuesday after the leak occurred about 6 miles south of Kathryn, North Dakota, according to North Dakota environmental quality program manager Bill Suess. A pipeline employee working on a pump station along the route heard what he described as a "mechanical bang" prompting him to shut down the pipeline, which took about two minutes, Suess said. Crude was then seen surfacing in an agricultural field about 300 yards south of the pump station, where it was contained. Suess said there is no impact to a nearby stream. South Bow estimates about 3,500 bl was released. No restart timeline The company and government officials did not have an estimate for when the pipeline would restart. Next steps involve assessing the area for other utilities before excavating down to the 30-inch pipeline to make repairs. The US Pipeline and Hazardous Materials Safety Administration (PHMSA) said it has dispatched personnel to the scene to conduct a failure investigation. Today's upset is the latest of several incidents to disrupt the market since it was commissioned in 2010. The pipeline halted flows for more than three weeks in December 2022 after it spilled about 12,937 bl of oil in Washington County, Kansas. A crack in a flawed weld was determined to be the cause. Once fixed, PHMSA allowed the line to operate again, but at a reduced pressure. Only last month did PMHSA give South Bow the green light to increase pressure again . Other US prices affected Louisiana-delivered Mars and Thunder Horse widened their premiums over the Domestic Sweet (DSW) benchmark by over 30¢/bl, trading at 80¢-$1/bl premiums and $1.80-$1.90/bl premiums to the basis, respectively. Texas-delivered Southern Green Canyon (SGC) traded as strong as a 60¢/bl discount against the Cushing basis Tuesday morning, after trading at $1/bl discount for the prior two sessions. April DSW was exchanged for May in the Cushing physical spot market at premiums as high 60-70¢/bl, from roughly 45¢/bl on the final day of the April trade month on 25 March. In the futures market, May Nymex WTI has moved up to end the session at a 48¢/bl premium to June, rising from a 26¢/bl premium at settlement in the prior session. DSW is the assumed grade for delivery into the Nymex contract. It is blended to specifications in Cushing and is comprised of various crudes, including Canadian grades. The appreciating differentials came despite pressure from weak export demand from the US Gulf coast. By Brett Holmes, Mykah Briscoe and Amanda Smith Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US faults EU carbon fee during tariff fight

08/04/25

US faults EU carbon fee during tariff fight

Washington, 8 April (Argus) — President Donald Trump's administration is citing the EU's upcoming tariff on carbon-intensive imports as one of the "unfair trade practices" that justified a tariff response. Trump has said a 20pc tariff on most EU goods and a higher tariff on many other key trading partners — set to take effect after midnight — are "reciprocal" to other countries' tariffs and non-tariff barriers, even though those tariffs are calculated based on each country's trade deficits and imports with the US. Trump has yet to even identify which trade policies he wants other countries to change before he would withdraw tariffs his administration expects will raise $600bn/yr in new revenue. But the US Trade Representative's office, in a social media post on Monday made in "honor" of Trump's tariffs, identified the EU's Carbon Border Adjustment Mechanism (CBAM) — which will collect a carbon-based levy on imports such as steel, cement and fertilizer — as one of the examples of what it sees as an unfair trading practice. The Trump administration estimates $4.7bn/yr of US exports would be affected by the CBAM, which is set to take effect in 2026. "These EU regulations undermine fair competition, penalizing US companies while providing advantages to EU-based competitors," the US Trade Representative's office wrote in a series of posts on Tuesday that also criticized India and Thailand for imposing import restrictions on ethanol produced in the US. White House officials say more than 70 countries have approached the administration seeking deals on the tariffs since they were announced nearly a week ago. But with just hours before the tariffs take effect, Trump has yet to announce any definitive agreements to withdraw the tariffs. Instead, he has rejected offers from countries to zero out some of their tariffs. European Commission president Ursula von der Leyen on Monday said the EU was "ready to negotiate" on tariffs, and would zero out its tariffs on industrial imports if the US agreed to do the same. But Trump on Monday said that offer was not enough. "We have a deficit with the European Union of $350bn, and it's gonna disappear fast," Trump said. "One of the ways that that can disappear easily and quickly is they're gonna have to buy our energy from us." Today, Trump said he had a "great call" with South Korea's acting president Han Duck-soo that created the "probability of a great DEAL for both countries." Trump cited a potential agreement that might include large-scale purchases of US LNG and investments tied to the 20mn t/yr Alaska LNG export project. Trump and his cabinet believe the tariffs will align with a goal to achieve "energy dominance" and increase the amount of US energy exported abroad. "At the end of the day, we're going to have growing American exports and reindustrialize the country," US energy secretary Chris Wright said today during an interview on CNBC. Trump's tariffs have already caused a selloff in equities and, according to many analysts on Wall Street, a higher likelihood of a recession. Oil prices have dropped because of a "sudden change in the economic outlook, whereas everyone just honestly 10 days ago was expecting modest but steady positive growth in the US", non-profit group Center for Strategic and International Studies' senior fellow Clayton Seigle said today. Republicans have largely backed Trump in his imposition of tariffs, with the hope the tariffs will be lifted as part of trade negotiations. But some Republicans have started criticizing the rationale for the tariff policy. "Whose throat do I get to choke if this proves to be wrong?" US senator Thom Tillis (R-North Carolina) said in a hearing today with the US trade representative Jamieson Greer. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more