EU-ETS Could Cost Shipping Firms Half as Much as Bunkers: Yara

The EU is starting to charge the shipping industry for its carbon emissions. File Image / Pixabay

The European Union's emissions trading system could end up costing shipping companies about half as much as they spend on marine fuels, according to Yara Marine Technologies.

From next year, the EU will require cargo and passenger ships over 5,000 GT in size to purchase emissions allowances covering the GHGs from their bunker consumption. The system will cover 100% of the emissions from intra-EU voyages, and 50% of those between the EU and elsewhere in the world.

A gradual phase-in has been agreed, meaning ships will pay 40% of the costs incurred in 2024, moving to 70% in 2025 and 100% in 2026.

EU allowances (EUA) bought to comply with that system could end up costing 50% as much as the bunker fuel needed for a voyage, price reporting agency S&P Global Commodity Insights reported this week, citing comments from Aleksander Askeland, CSO of Yara Marine Technologies.

"While it is impossible to make long term predictions for the market, we believe that shipowners should be making every effort to reduce their exposure to variable costs for bunkers and carbon credits and invest in technologies that can reduce both, fuel costs and emissions, over the lifetime of the vessel," S&P cited Askeland as saying.

S&P assessed the price of EUA December contracts at EUR78.70/mtCO2e ($85.51/mtCO2e) on November 10. With around 3.15 mt of CO2 emissions produced per mt of fuel oil consumed, this would give an EUA cost of about $269 per tonne of bunker fuel consumed -- although only 40% of this cost will need to be paid for next year for intra-EU voyages, and only half of that for voyages between the EU and elsewhere.