18 April 2023
On the 18th of April the European Parliament, during the plenary session in Strasbourg, approved two pieces of legislation that are part of the ‘Fit for 55’ package, namely the EU Emission Trading System (ETS) and the EU Carbon Border Adjustment Mechanism (CBAM). The texts now also have to be formally endorsed by the Council.
Within the EU ETS framework, the Parliament included for the first time GHG emissions from maritime shipping.
EU ETS Maritime will make a distinction between “intra-EU voyages”, which are voyages between two ports in the EU, and extra-EU voyages, which are inward and outbound voyages between a port in the EU and a port outside the EU. ETS maritime will apply to all (100%) emissions on intra-EU voyages and half (50%) of the emissions on extra-EU voyages.
EU ETS will be phased in between 2024 and 2026 meaning shipping companies will be required to submit allowances to cover a gradually increasing amount of emissions following the below timeline:
- 40 % of emissions by 2024
- 70% of emissions by 2025
- 100% of emissions by 2026
Regarding the use of the revenues, at least 20 million ETS allowances, which correspond to around EUR 2 billion under the current ETS carbon price, will be earmarked for dedicated maritime calls under the Innovation Fund.
As for the CBAM, its aim is to incentivise non-EU countries to increase their climate ambition and to ensure that EU and global climate efforts are not undermined by production being relocated from the EU to countries with less ambitious climate policies. Therefore, importers of goods covered by the CBAM (such as iron, steel, cement, aluminium, fertilisers, electricity and hydrogen) would have to pay any price difference between the carbon price paid in the country of production and the price of carbon allowances in the EU ETS.
Moreover, The CBAM will be phased in from 2026 until 2034 at the same speed as the free allowances in the EU ETS are being phased out.