WSC Requests to the European Council for an EU ETS achieving Green Deal Success
The World Shipping Council is the united voice of liner shipping, working with policymakers and industry groups for a socially responsible, environmentally sustainable, safe, and secure shipping industry. WSC members in the liner industry are among the first movers leading the decarbonisation transition globally and within the European region. We need good policy in the Fit-for-55 package and especially an effective inclusion of shipping within the EU ETS framework that delivers the right GHG price signals to the parties that can change and shift the sector to the green vessel technology needed for deep decarbonisation. As you prepare for the adoption of a Council General Approach on the EU ETS revision we would urge you to consider the following elements that are critical for the shipping industry’s transformation.
Shared responsibility for ETS compliance costs must be recognized as critical to the transition timeline for decarbonising shipping. We welcome the French Presidency text’s endorsement of the Commission’s definition of the shipping company as the entity responsible for compliance. This is essential.
We are however, gravely concerned by the most recent proposals requiring that Member States adopt national measures to ensure that the shipping company is automatically reimbursed for all costs incurred under the Directive. This will guarantee a distorted, diverging and uneven application of such rules across the EU. WSC members, as vessel owners, charterers and operators are convinced that the payment of ETS compliance costs should be determined by the contracting parties themselves, without legislation limiting their freedom to negotiate the most appropriate terms. Model contract clauses have already been adopted by the industry to manage this issue, further underlining the redundancy of a legal determination.
Such a measure will also entirely blunt the GHG market signal that shipowners - as the technology provider - should not be arbitrarily shielded from. All parties in the shipping sector need to play their part to ensure a rapid investment in green vessels and fuels. If not operators unable to charter green vessels but legally required to bear all costs will have reduced options to mitigate those costs, other than their choice of route and speed. Consequently, we urge you to follow the approach adopted within the EU Transport Council’s General Approach on the Fuel EU Regulation that refrained from legally prescribing how costs should be allocated.
Supporting and enhancing competitiveness for EU ports requires innovation and investment not protectionism. The issue driving GHG leakage and risks of competitive disadvantage derive from the extra-EU scope of application itself, as concluded by the Commission’s own impact assessment and subsequent independent research.
Proposals such as disqualifying third country ports within 300 nautical miles of the EU, from the Directive’s definition of a third country port call, will not prevent carbon leakage. Extending further the geographical scope of the EU ETS will amplify the unintended market signals for some of the most important EU ports (particularly in the Mediterranean region).
To solve the problem of carbon leakage, Member States need to push for a global GHG MBM and other effective measures at the IMO which is now making real strides forward. Extra-EU scope for the ETS and revenue raising in the High Seas, however, are more likely to raise barriers to IMO progress rather than ambitions in that forum.
Renewable and low-GHG fuels need to be assessed on a life-cycle basis. Overpricing renewable fuels based only on tank-to-wake carbon content undermines the intent of bringing maritime into the EU ETS. EU ETS market signals can be most effective when complemented by the necessary investment production and supply of renewable energy and production of low-GHG fuels for shipping.
Properly pricing allowances for onboard fuels derived from low-GHG production (RFNBOs, etc.) requires inclusion of rigorous life-cycle metrics. It is not too late for Council to integrate a life-cycle approach to the EU ETS that will further incentivize the shipping industry’s move to fuels that are produced with renewable energy and that perform to reduce GHGs from production to supply to onboard energy power – i.e., across the fuel life cycle.
Once again, we would like to thank you for the careful consideration you may give to these views. The liner shipping industry is investing and is ever more determined to secure its place in the new sustainable global transport chain. We need regulators to craft the legislation that will help us achieve that goal and we stand ready – with all hands - to offer any assistance that may be needed.