In connection with the European climate law, where the EU sets out to reach climate neutrality in 2050 and reduce net emissions of greenhouse gases by 55% compared to 1990 levels by 2030, EU also introduced the EU ETS back in 2005.
The EU ETS works via a ‘cap-and-trade’ principle, setting a cap on the total amount of greenhouse gas emissions that can be emitted across different industries. The cap is reduced anually in line with the climate target, ensuring that emissions decrease overtime, and makes polluters pay for their greenhouse gas emissions.
In addition, the European commission introduced the “Fit for 55” package in 2021 – an initiative to make all sectors in the EU economy fit to meet the 2030 target. This included an expansion of the EU ETS to include emissions from maritime transport from January 2024, thus having a direct effect on our business operations.
How it works:
The EU ETS consists of a fixed set of emissions allowances, where one allowance gives the right to emit one tonne of CO2 equivalent. EU sets the cap, the number of allowances available, and it is then up to each company to purchase enough allowances to account for their respective emissions – otherwise, companies will receive a fine.
The EU ETS sets out to govern European carbon emissions and companies conducting voyages on EU territory must purchase allowances for:
However, to ensure a smooth transition, the EU have created a phase-in period where shipping companies only have to surrender allowances for a portion of the emissions during the phase-in.
How does it impact our customers?
As with other regulations, there will be costs associated with complying with the EU ETS, adding extra costs to shipping in general.
To meet the requirements of EU ETS, we have expanded our in-house risk system and enabled our voyage management system to handle allowances, as well as ensured that the price is embedded into our contracts.
In order to offer the most optimal solutions for our customers, we have settled on different ways of pricing under the EU ETS Scheme.
At NORDEN we are committed to reaching net Zero in 2050, and we therefore work proactively with adopting the EU ETS regulation and integrating it into our business operations, so that we can continue to offer our customers the best possible services.