Fit for 55 – how it will affect maritime shipping
When the EU Commission presented its Fit for 55 climate package, it was clear that shipping would be affected in a number of ways. To achieve the goal of a climate-neutral EU, shipowners are expected to take on greater individual responsibility and higher costs. While the Swedish Ship Owners Association is positive, it also sees several challenges.
Zero emissions 2050 - this is one of the objectives of the European Commission’s Fit for 55 climate package presented in July 2021. To achieve it, carbon dioxide emissions must be reduced by 55 percent by 2030 compared to 1990 levels, and there are a number of proposals for maritime shipping worth noting. Some of the most important concern energy taxes and changes in emissions trading.
Risk of a patchwork of rules
When Fit for 55 was announced, the Swedish Ship Owners Association issued a press release welcoming the proposal. However, Fredrik Larsson, Senior Policy Advisor, Safety & Environment and responsible for climate issues at the Swedish Ship Owners Association, emphasises that he would rather the regulations had been developed at the global level.
“It’s good that the EU is developing tools to help us move forward in our climate efforts. On the other hand, there’s a risk that international shipping will have to comply with a global patchwork of rules. We would rather it had been done through the International Maritime Organization (IMO) instead, so we would have the same rules worldwide,” he says.
Emission allowances and taxation
Today, shipping transports 90 percent of all goods and almost all ships are powered by fossil fuel. From 2023, the EU wants to include shipping in its emission trading scheme, also known as the EU ETS. The aim is to reduce the difference in price between fossil and fossil-free fuels. By including maritime shipping to the EU CO2 emissions trading scheme, shipowners will simply have to pay to emit carbon dioxide.
“Biogas, ammonia and electricity are available alternatives, but not in the volumes necessary. Some customers are willing to pay more for green shipping, but if everyone demands it, then there’s simply not enough green fuel available today to satisfy everyone,” says Fredrik Larsson.
Another part of the European Commission’s proposal is FuelEU Maritime, which seeks to increase demand for non-fossil fuels by progressively reducing greenhouse gas emissions from vessels above 5,000 GT.
“Similar systems already exist for motorists, with the difference in this case being the fuel supplier, who is required to add a percentage of renewables. Under this proposal, it will be the shipowner who is responsible for ensuring that the renewable fuel is added, and that such fuel is fossil-free throughout the chain. Checking will be extremely complicated for individual shipowners,” says Fredrik.
New ships ready right now
Even though Fit for 55 is on the whole an ambitious legislative proposal with short lead times, the Swedish Ship Owners Association thinks the Alternative Fuel Infrastructure Regulation update is too mild.
“The EU wants shore power for container ships and passenger vessels in core ports by 2030. We want the date brought forward and all types of ships included. We have ships that want to connect right here right now, and this ought to be done faster,” says Fredrik Larsson.
WALLENIUS SOL is one of the shipping lines in full swing charting its climate and environment course. With two new multi-fuel vessels soon ready for delivery, it feels well equipped to handle any necessary adaptations it must make and is currently studying additional measures.
“No matter what we might think about laws and regulations that greatly increase our costs, we all know that financial policy instruments are necessary to make essential things happen. We all have to do our bit in the transition toward a climate-smarter world,” says Ragnar Johansson, CEO WALLENIUS SOL.
Fit for 55 in a nutshell
Fit for 55 will affect every industrial sector, and there are four proposals that will have a major impact on maritime shipping:
European Trading System (ETS) Directive
As of 2023, maritime shipping will be subject to the EU CO2 emissions trading scheme. It will include all emissions within the EU, but only 50% for voyages to and from the EU. Phase-in period: 20% coverage in 2023 and 100% by 2026.
FuelEU Maritime Regulation
In 2025, a new regulation will come into force that sets greenhouse gas (GHG) footprint standards for ships. GHG intensity from energy used on board must improve by 2% by 2025, 6% by 2030, 13% by 2035, 26% by 2040, 59% by 2045 and 75% by 2050. From 2030, the regulation will also require container and passenger ships to connect to shore power for calls lasting more than 2 hours.
Alternative Fuel Infrastructure Regulation
A revision of the existing directive will mean that EU Member States must increase the availability of LNG by 2025 and shore power by 2030 in EU core ports (TEN-T).
Energy Taxation Directive
Conventional fuels will be taxed between EU ports commencing 1 January 2023. The new rate will be around EUR 37 per tonne for heavy fuel oil. Initially, LNG will be taxed at a rate of EUR 0.6 per GJ. Alternative fuels will be tax-exempt for a period of 10 years.
Source: DNV GL