The maritime industry is currently a significant contributor to global CO2 emissions, accounting for approximately 3% of total emissions. The UNCTAD Review of Maritime Transport 2023 emphasizes the need for a “just and equitable transition” toward a decarbonized shipping industry. Over the past decade, the maritime sector has experienced a 20% increase in greenhouse gas emissions, largely due to its aging fleet, which still relies heavily on fossil fuels.
With the rising demand for shipping services, the industry’s carbon footprint is expected to grow unless proactive measures are taken. As global awareness of environmental impacts increases, the journey toward a low-carbon future has begun. This has led to concerted efforts to minimize carbon footprints across various sectors, with decarbonization becoming a pivotal focus in the maritime industry.
Understanding Decarbonization
Decarbonization refers to the process of reducing carbon dioxide (CO2) emissions, primarily through the adoption of cleaner energy sources and more efficient technologies. In the maritime context, it involves transitioning to alternative energy solutions, enhancing vessel efficiency, and implementing regulatory measures to curb emissions. The International Maritime Organization (IMO) has set ambitious targets to reduce greenhouse gas emissions by 50% by 2050. Additionally, the European Union Emissions Trading System (EU ETS) is a landmark regulation that includes shipping in its carbon trading scheme, marking a significant step towards reducing emissions.
EU ETS – Balancing Emissions Through Cap and Trade
The EU Emissions Trading System (ETS) operates on a ‘cap-and-trade’ principle. The cap sets a limit on the total amount of greenhouse gases that can be emitted by the industries covered under the system. This limit is gradually reduced each year in alignment with the EU’s climate goals. The objective of the ETS is to cut emissions by 62% from 2005 levels by 2030. The cap is represented in emission allowances, with each allowance granting the right to emit one ton of CO2 equivalent (CO2eq). Companies are not permitted to exceed their allocated allowances, and those that do face heavy fines. Firms under the EU ETS must surrender allowances corresponding to their emissions through the Union Registry. For example, if a company emits 10,000 tons of CO2 during a reporting period, it must purchase and surrender 10,000 allowances by the following year’s deadline of September 30. These allowances are sold through auctions and can be traded on secondary markets. This system offers flexibility, encouraging companies to reduce their emissions in the most cost-effective way. Each year, companies face a choice: reduce emissions or pay for the allowances needed to cover them.
From 2024, ships above 5,000 GT transporting cargo in the EU will need to acquire and surrender emission allowances for their CO2 emissions. The phase-in period allows companies to transition smoothly, covering 40% of verified emissions in 2024, 70% in 2025, and 100% from 2026 onwards.
Key Aspects of EU ETS
- Compliance and Reporting: Shipping companies must register with an administrative authority and report emissions through the EU MRV system. Accurate noon reporting is essential for compliance.
- Emission Allowances: Companies must purchase EUAs, representing the right to emit one ton of CO2. These can be acquired through auctions or traded in the secondary market.
- Penalties for Non-Compliance: Non-compliance can lead to penalties, including expulsion from the EU market and public disclosure of penalized operators.
Synergized Commitment
Synergy Ocean Maritime Inc. is committed to leading the charge toward decarbonization. Initiatives include optimizing vessel operations, ensuring compliance with regulatory standards, and investing in energy-efficient technologies. A collaborative approach is essential, working with industry partners to achieve a sustainable maritime future.
Decarbonization is a collective responsibility essential for protecting the environment and ensuring a sustainable future. By embracing sustainable practices, the maritime industry can significantly propel efforts towards a cleaner, greener world where the seas are as pristine as they are vast.
Reference:
- SOMI. QHSE Circular No. 002-2024, European Union Emissions Trading System (EU ETS), 09 January 2024.
- European Commission. “FAQ – Maritime transport in EU Emissions Trading System (ETS) – European Commission (europa.eu)”