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Make charterers, not owners, pay for emissions, say EU shipowners

Entity that buys the fuel ‘should bear responsibility for buying carbon allowances’ in EU

EU shipowners’ association also calls for dedicated fund to support marine fuel transition

EUROPEAN shipowners want the cost of  buying carbon allowances to be passed to commercial operators, not owners, and for this to be enshrined in law when the maritime sector becomes part of the European Union’s emissions trading scheme in 2023.

The controversial proposal will see ships calling at EU ports effectively pay a price per tonne on their carbon emissions as part of the bloc’s Fit for 55 package to address climate change.

Public feedback is now sought on the initiative that was released in July, as the council begins to translate the policy into law.

The European Community Shipowners’ Associations has outlined its objections to the directive in its current form in a policy paper.

The Fit for 55 directive that covered emissions trading said that under the ‘polluter pays’ principle, shipping companies can establish contractual arrangements with charterers over who pays for buying the carbon allowances, but there is no mandate.

“Notwithstanding this clear political message, no binding requirements are introduced and the pass-through of costs is instead left to the devices of the market,” Ecsa’s paper says.

Ecsa wants the entity responsible for decisions affecting the CO2 emissions of a ship to bear the costs.

“This entity would be the entity that is ultimately responsible for the purchase of the fuel and the choice of route and speed of the ship,” the paper said.

Ecsa, which represents 19 national shipowner associations controlling some 40% of the global commercial fleet, is one of many industry and lobby groups worldwide lobbying for changes to the ETS.

Shipping companies must surrender allowances for carbon emitted for all intra-EU voyages and half of international trips, with a phase-in period of 20% from 2023, rising to 100% after 2026.

Some 90m tonnes of carbon, covering two thirds of maritime transport emissions, will be incorporated into the scheme.

In addition to whether the charterer or the owner pays, there are questions over which corporate owning or operating entity holds responsibility for buying carbon allowances and how that is managed.

Ecsa has also recommended a specific Maritime Climate Fund be established from revenues that is used to “financially support the energy transition of the maritime transport sector”.

Shipping companies could even be exempt from buying carbon allowances and instead contribute an annual membership equal to their total emissions to the fund.

The fund would then collectively surrender allowances on their behalf.

Pooled money would be used to “financially support the energy transition… and should contribute to lowering the price differential between cleaner and conventional fuels”, Ecsa said.

Intertanko and the Japanese Shipowners’ Association are among those to have submitted their feedback to the European Commission.

It was “wrong to assign the responsibility for compliance to shipping companies rather than assigning it to trade”, Intertanko said.

Japan’s shipowner group said it was “strongly opposed” to regional regulations that impacted international shipping.

“If the EU were to introduce a regional emissions trading scheme in advance of any IMO global regulatory framework, there is a risk that other countries will follow suit rendering any IMO regulations meaningless,” the feedback said.

“If each country or region introduces a charging system, including emission credits, related to emission control, there is a risk of inconsistencies with other regional schemes and, once again, the potential for double-charging.”

Others, including the Union of Greek Shipowners, and the International Chamber of Shipping have publicly objected to the incorporation of 50% of emissions from international voyages, arguing only intra-EU voyages should be included.

Bangladesh, China, India and Panama have made their objections known via a submission to an IMO committee last September. The paper criticised so-called unilateral measures to control greenhouse gas emissions in a thinly veiled attack on EU member countries.

All groups and countries want to persist in developing an international approach over the EU’s go-it-alone move, even as analysis shows regulations mandated at the IMO do not go far enough to meet agreed CO2 emissions reduction objectives.

Unlike other lobby groups, European shipowners have been careful not to label the Fit for 55 proposals as an unwelcome incursion or an over-reach because shipping emissions reductions should be led by the IMO.

“Although we support the pass-through of the costs to the commercial operators, we don’t support that operators should buy/surrender allowances,” Sotiris Raptis, ECSA deputy Secretary General said.

“We have a strong preference that the issue is sorted out in the context of the contacts between the owners and the operators by making this clause binding by law.”

Delays are already expected to bringing shipping into the ETS by the stated deadline of January 1, 2023. The timeline is said to be too quick to properly prepare and have ready within the 14-month deadline.

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