EU amends GCC partnership agreement on ETS

The European Union (EU), the second-largest trade partner to the Gulf Cooperation Council (GCC),has made amendments to incorporate maritime transport into its Emissions Trading Scheme (ETS), which requires all ships calling at EU ports, regardless of where it is flagged, to purchase carbon allowances to cover their emissions, with the charterer held primarily responsible for payments.

The carbon price as of May 24, 2022, is riding at $86  of CO2; with current estimates of 3.15 CO2 emitted per tonne of Very Low Sulphur Fuel Oil (VLSFO), charterers face additional costs of approximately EUR258 for every tonne of fuel it burns in transit to and from the EU.

There are also plans among MEPs to expand the scope of the ETS to incorporate other forms of greenhouse gases, including methane, which would generate mass uncertainty for charterers of LNG-fuelled ships with well-documented challenges when it comes to methane slip. This development could lead to uncertainties of costs for both the existing Middle Eastern oil-fuelled vessels, and the growing LNG-fuelled fleet in the region.

With both marine gasoil and its alternatives becoming increasingly regulated worldwide, charterers will need to opt for other means of reducing carbon from their shipments to spare themselves from debilitating costs. Shipowners, meanwhile, must recognise the clear business case for making lower carbon vessels available to their customers to capture this shift in demand ,especially if global economies continue to turn to the Middle East for oil products in the wake of Russian sanctions.

With shipping’s inclusion into the ETS to be activated as soon as 2023, it would not be easy for the next generation of more energy efficient vessels is not a realistic option for charterers to reduce their fuel consumption, emissions, and resulting carbon costs. Panacea solutions like hydrogen, renewable gases, and other clean fuels generate hope , but these solutions will not be available at scale in time to address the challenges of the immediate future.

The marine industry clearly requires a means to improve the efficiency of the existing fleet if it hopes to control OPEX and contribute sustainably to a low emission, low carbon future.

Wind power hardly needs to prove its credentials as the precursor to all forms of marine propulsion. A number of wind propulsion solutions, from rotor sails to kites and rigid wings, augment core engines with renewable power for proven and considerable fuel efficiency improvements for international trade vessels.

Emissions reduction potential ranges from product to product, with BAR Tech’s own patented solution leading the charge with a 30 percent curb at full-scale deployment – trimming nearly a third off the looming carbon costs for trade with the EU.

Emissions reduction technologies have a key role to play in enabling the decarbonisation of the existing fleet. Wind propulsion provides one among the best options to shipping with a renewable resource as  it is free, accessible even on the most remote trade routes, and takes the edge of increasing costs for fuel both now and across the remaining lifespan of the vessel as alternative fuels mature.

As global attitudes and policy towards bunker reliance and vessel emissions change, emerging now in Europe but potentially globally as the International Maritime Organization (IMO) endeavours to keep pace, the fallout of additional financial responsibility for the Middle East’s shipping industry will remain under control as long as investment into decarbonising technology remains a priority.