There has been extensive speculation of the cost for shipping from the European Union’s Emissions Trading System.

In Hecla Emissions Management analysis it is suggested that the shipping industry could be liable for €3.1 billion in 2024, €5.7 billion in 2025 and €8.4 billion in 2026.

Hecla Emissions Management, established by Wilhelmsen Ship Management (WSM) and Affinity Shipping LLP in 2022, to assist shipping clients with each of the compliance obligations associated with EU ETS participation, says the dataset for 2022 from EU´s Monitoring, Reporting and Verification (EU MRV) for shipping’s European CO2 emissions, shows some significant year-on-year changes from 2021 despite the shipping industry as a whole, showing a modest reduction in emissions.

The EU MRV regulation requires all ships exceeding 5,000 gross tons to collect and report data on CO2 emissions released to and from EU and EEA ports, and will serve as the basis for shipping’s inclusion in the EU Emissions Trading System (ETS) from 1 January 2024.

Total ETS-applicable emissions for the maritime industry amounted to 83.4 million metric tonnes of CO2 equivalent (tCO2e) in 2022, a modest decrease of 0.22% from 2021. At the current market value of €90 per emissions allowance (EUA), shipping emissions carried a total worth of €7.5 billion for the year.

In its analysis Hecla Emissions Management indicates that the shipping industry could be liable for €3.1 billion in 2024, €5.7 billion in 2025 and €8.4 billion in 2026. In their estimates it was taken into account the ETS phase-in period covering 40% of emissions in 2024, 70% in 2025 and 100% in 2026, and they also utilised the forward curve in EUAs.

The data showed emissions decreases across multiple shipping segments, including tankers, container ships, general cargo ships, reefers, Ro-Ros and chemical tankers. The container sector showed the largest reduction, falling by 8.95% equating to 2.3 million metric tonnes of CO2 equivalent saved.

However, passenger ships and LNG carriers logged substantial increases. The former scored highest, with a staggering 118% year-on-year rise equating to 2.8 million (tCO2e), the latter recording a 63% increase equating to 2.1 million tCO2e.

“It is important to note that the changes in emissions levels are less reflective of improved environmental operations as they are of altered European trade patterns,” as Hecla Emissions Management points out.

Container shipping, for example, experienced a bumper year in 2021 versus a noticeably cooler market in 2022, while LNG carriers saw a dramatic trading shift away from Asia towards Europe as Europe reduced its reliance on pipeline gas in the wake of Russia’s invasion of Ukraine, importing significantly more LNG by sea.

“The projected liabilities emphasize the importance of shipping companies preparing for their entry into the ETS. We have been onboarding customers from across shipping’s value chain in order to have them fully prepared by the start of next year. We encourage more shipping companies to do the same,” said Hugo Wilson, Director of Hecla Emissions Management.