Starting January 1st, 2024, carriers will apply an EU ETS Surcharge to the cost of every shipment that reflects the criteria expressed in the directive. What’s this all about?
The transportation and logistics industries are among those with the highest environmental impact. According to the International Energy Agency, ocean freight is responsible for the 10.6% of the total global CO2 emissions produced by the industry, following road (74.5%) and air (11.6%) freight.
The EU Emissions Trading System was launched in 2005 and is the world’s major carbon market. It is part of a set of legislative proposals with the objective of reaching EU carbon neutrality within 2050. The EU ETS is a key tool for reducing the release of some greenhouse gases in specific industries.
On July 14, 2021, the EU Commission presented the Fit for 55 package, a group of proposals aimed at revising and updating the EU’s regulations with the goal of reducing GHG emissions at least by 55%* within 2030. The package includes several measures to update the EU ETS, such as, for example, the addition of maritime transport in the carbon market.
The EU ETS is based on a mechanism called cap-and-trade. This system sets a maximum threshold (cap) for the greenhouse gas emissions that can be released into the atmosphere. According to the maximum limit, market players must buy emissions allowances (EUA – European Union Allowances): by purchasing them, companies obtain the authorization to issue a GHG quantity corresponding to the quantity of the allowances they bought (1 allowance = 1 ton CO2eq). The allowances can also be exchanged in trade to avoid being fined.
The purchase of a specific allowance implies an increase in cost for the market players (among whom maritime carriers will be included).
The EU ETS, thus, cannot guarantee an effective reduction of greenhouse gas emissions released by carriers. However, by lowering the cap every year, it limits the number of allowances that can be bought by carriers, urging them to develop new techniques to cut the emissions.
Starting in 2024, the parties involved have decided to gradually add maritime trade emissions to the carbon market.
The obligation for carriers to surrender the allowances will be introduced progressively and based on the following scheme:
The EU ETS applies to member states of:
The EU ETS is applied to:
Starting from the consideration that each business has an impact on climate change and that funds for research and development of carbon-neutral solutions are needed, maritime companies have announced that the cost of adjusting to the EU ETS will be reversed on shipments that are compliant with the application criteria.
Starting January 1st, 2024, carriers will apply an EU ETS Surcharge to the cost of every shipment.
It is a variable that could be subject to shifts among different carriers. In fact, it is computed using specific parameters by each shipping company.
We, at D.B. Group, recognize the fundamental role that transparency of information has. Therefore, we will apply the surcharge transparently and at cost.
Our teams keep monitoring the information and remain at your complete disposal to answer every question.
D.B. Group.
Notes:
* with respect to 1990.
