Date: Monday, November 7th, 2022
Mediterranean Shipping Company (MSC) has warned clients of higher costs with the inclusion of shipping in the EU’s carbon trading market.
The EU emissions trading system (ETS), part of the “Fit for 55 package” to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels, requires companies to surrender allowances that equal their emissions above a certain cap at the end of the year. The price of carbon credits for shipping would be set by the carbon market in a similar way to the current system covering all industries included in the ETS.
In its latest customer advisory, the world’s largest containerline said it would pass on the cost of ETS emission allowances, the same way it has done with other forms of environmental regulatory costs in the past.
MSC added that the cost would depend on the price of the EU allowances (EUAs) and on whether the shipping industry’s involvement is phased-in over several years, or required 100% from day one. The European Commission has proposed a phased-in approach over the next four years, beginning on January 1, 2023, while the Parliament has recommended 100% application from the start. The final start date for coverage has yet to be determined.
The Swiss-based carrier will make calculations beginning on the day the system is introduced by the EU and will review them monthly, based on a benchmark public index for EUA prices. “Each trade, comprising a number of MSC services, will have its own charging structure for inbound and outbound cargo to compensate for the new costs from the need to acquire these allowances,” it said.
The extension of the existing system to shipping would include all emissions from ships calling at an EU port for voyages within the EU as well as 50% of the emissions from voyages starting or ending outside of the EU, and all emissions that occur when ships are at berth in EU ports. Another pending proposal being debated in the EU institutions would extend the geographical scope of the emissions reporting area to ports within 300 nautical miles of EU waters.
Using an example, based on a EUA price of €90 per ton of CO2 applied with a 100% obligation, MSC estimated adding the cost on its Far East to North Europe trade of €69 per teu for dry containers and €208 per feu for reefer containers. For North Europe to Asia, the cost would be €37 per dry teu and €110 per reefer feu.
This is the second public intervention on incoming green legislation that the usually media-shy MSC has made this week. Commenting on the Carbon Intensity Indicator (CII), an MSC spokesperson said: “CII should not effectively penalise vessels trading on shorter distances and while waiting alongside,” suggesting that: “It would be far better to have an operational indicator that would reward more productive ships, including based on cargo carried rather than on a theoretical value that may not correlate to transport work performed.”