Negotiators for the revision of the EU Emissions Trading System (ETS) from the European Parliament and the Council of the European Union reached a preliminary agreement on the inclusion of CO2 emissions from the maritime sector in the carbon market on Tuesday 29 November, at the end of the fifth session of interinstitutional negotiations (‘trilogues’).
After a first failed attempt (see EUROPE 13069/17), negotiators agreed to require shipping companies to surrender emission allowances from 2025. In that year, the surrender of allowances will have to correspond to 40% of the verified emissions declared for 2024. This would then increase to 70% (of 2025 emissions) for the year 2026, before reaching 100% (of 2026 emissions) in 2027 and subsequent years.
It is a compromise between the Parliament’s position (100% from 2024) and that of the EU Council. The latter wanted a gradual pace with four different rates (20%, 45%, 70% and 100%), starting the first year after the deadline for transposition of the new rules. This approach would have led to shipping companies only paying for 100% of emissions in 2029, according to Parliament’s rapporteur Peter Liese (EPP, German).
The timetable for the surrender of allowances agreed by the negotiators still needs to be validated by the EU Council.
“The Czech Presidency (of the EU Council) will have to convince the Member States here”, said Mr Liese, while expressing confidence.
Scope
As regards the journeys covered, the agreement maintains the Commission’s original proposal to apply the ETS at 100% of intra-EU journeys and 50% of international journeys to and from the EU.
“If a trip goes from Rotterdam to Shanghai, 50% of the trip is covered”, explained the rapporteur.
While this approach was supported by the EU Council, MEPs wanted a broader scope (see EUROPE 12977/10).
“Small” ships exempted
According to the text put forward by the Commission, only emissions from large ships (with a gross tonnage of more than 5,000 GT) would be affected. Yachts and other luxury vessels with a lower gross tonnage would therefore remain outside the carbon market, Mr Liese lamented.
The agreement nevertheless provides for the possibility of extending the ETS to ships between 5,000 and 400 GT, based on an evaluation of the new rules to be carried out in 2026.
Parliament also obtained the inclusion of off-shore vessels in the ETS.
For ice-class ships, the co-legislators agreed on a provision that shipping companies can surrender 5% fewer allowances than their verified emissions until 31 December 2030 for ice-class IA or IA Super ships or equivalent ice-class.
Extension to other emissions
At the request of Parliament, the agreement provides for the extension of the ETS to emissions other than CO2 in the future.
Methane and nitrous oxide (N2O) emissions from the maritime sector would thus be automatically included in the ETS from 2026. The EU Council, on the other hand, wanted to make this measure conditional on a report by the Commission.
No Oceans Fund
In the face of opposition from the EU Council and the Commission, Parliament abandoned its proposal to establish an Oceans Fund to be financed by 75% of the revenue from the extension of the ETS to the maritime sector.
The co-legislators did agree to allocate the proceeds from the sale of 20 million allowances, or about €2 billion (the amount will vary depending on the price per tonne of CO2), to shipping-related projects under the Innovation Fund.
While MEPs wanted to set aside 15% of the Oceans Fund for the protection of marine ecosystems affected by global warming and the promotion of a sustainable blue economy, the provisions retained by the co-legislators are weaker on this subject.
The agreement thus introduces a simple recital encouraging Member States to increase the use of revenues to contribute to the protection, restoration and better management of marine ecosystems, in particular marine protected areas.
Many unresolved political issues
While this agreement on the maritime sector represents real progress in the negotiations, many points continue to divide the co-legislators, in particular the creation of a second ETS covering emissions from heating of buildings and road transport (ETS2 or ETS BRT).
“More than 50% of the of the political points are still open”, said Mr Liese.
He is nevertheless hopeful that a final agreement on the entire ETS review will be reached at the next trilogue scheduled for 16-17 December.
“I am still not sure if we can make it under the Czech Presidency, but I am a bit more optimistic”, he said.
The next trilogue is expected to deal not only with the ETS, but also with the Social Climate Fund and the Carbon Border Adjustment Mechanism (CBAM), two dossiers closely linked to the ETS. (Original version in French by Damien Genicot)