How EU Emissions Trading Scheme Affects NZ Importers and Exporters
2-minute read
From 1 January 2024, the EU Emissions Trading Scheme (EU ETS) will be extended to cover CO2 (carbon dioxide) emissions from all large ships (of 5000 gross tonnage and above) entering EU ports, regardless of the flag those ships fly.
This means that shipping operators will be obligated to cover the costs of their carbon emissions.
White it may be European, it will impact anyone who sends cargo to, or sources it from, any country in the European Union.
The European Parliament’s Rapporteur for Maritime Emissions, Jörgen Warborn, has welcomed the legislation as “the world’s most ambitious path to maritime decarbonisation”, adding that the new rules will encourage others to move too.
The global shipping industry is critical to international trade and accounts for 3% of global greenhouse gas emissions. The EU’s new rules will impact the global shipping industry, bringing both challenges and opportunities on the path to net zero.
Which emissions fall within the scope of the EU ETS?
- 50% of emissions from voyages which start or end at EU ports (e.g. Tauranga to Zeebrugge); and
- 100% of emissions that occur between two EU ports and when ships are within the EU and adjacent areas (e.g. Antwerp to Ireland).
Initially, the EU ETS will only cover CO2 emissions. From 2026, it will also include CH4 (methane) and N2O (nitrous oxide).
In practice, once the new rules are fully implemented, shipping companies will have to purchase and surrender (use) EU ETS emission allowances for each tonne of applicable reported CO2 (or CO2 equivalent) emissions.
Shipping companies must surrender their first ETS allowances by 30 September 2025 for emissions reported in 2024.
Timeline: phased surrender of allowances
To ensure a smooth transition, shipping companies will only have to purchase and surrender allowances for a portion of their emissions during an initial phase-in period:
- 2025: for 40% of their applicable emissions reported in 2024;
- 2026: for 70% of their applicable emissions reported in 2025; and
- 2027 onwards: for 100% of their applicable reported emissions.
The introduction of an incremental phase-in is intended to allow the maritime sector to adjust to its obligations and incorporate these into future operations more smoothly.
Who will be ensuring compliance?
EU Member State administering authorities will be responsible for monitoring and ensuring compliance.
For non-EU shipping companies, administration of the scheme will be the responsibility of the Member State that the company visits most frequently in a two-year period or the first port that the company visits if it has not made any voyages within the EU in the previous two years.
2028: 50% of emissions rule due for review
Subject to the work led by the International Maritime Organization (IMO) on maritime emissions reductions, the new rules say that the EU will review whether the EU ETS should cover more than 50% of international emissions from voyages between the EU and third countries after 2028.
Source: New Zealand Foreign Affairs and Trade, A greener voyage: EU tackles maritime emissions. Market Intelligence Report, September 2023
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