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Global News Maersk, Hapag-Lloyd put shippers on notice ahead of European ETS surcharges

Registration dateOCT 06, 2023

Greg Knowler, Senior Editor EuropeSep 22, 2023, 11:13 AM EDT
Articles reproduced by permission of Journal of Commerce.

Greg Knowler, Senior Editor Europe
Sep 22, 2023, 11:13 AM EDT
Articles reproduced by permission of Journal of Commerce.

Maersk, Hapag-Lloyd put shippers on notice ahead of European ETS surcharges Shipping contributes 13% of Europe’s overall transport greenhouse gas emissions. Photo credit: Maersk.
Two major carriers have unveiled details of the estimated surcharges shippers will face next year as liners fall into compliance with the European Union’s emissions trading system, with Maersk warning those costs will be “significant.”

Starting Jan. 1, ship operators will be required to monitor and report their emissions and surrender allowances for every ton of CO2 they emit covering all voyages within the European Economic Area and 50% of voyages ending or beginning in European ports.

“The cost of compliance is expected to be significant and will keep increasing with the phased implementation,” Maersk noted in a recent customer advisory. “It will be passed on in the form of a standalone surcharge known as ‘Emissions Surcharge’ and applied to all bookings on a voyage that will be subject to the EU ETS.”

Hapag-Lloyd told its customers Friday that the ETS will “trigger an added cost for shipping companies that will be applied as a separate surcharge for cost recovery purposes to all applicable shipments.”

To recover those costs, Maersk has estimated that on Asia-North Europe it will need to charge shippers €70 per FEU, while Hapag-Lloyd expects to charge €12 per TEU. North Europe to the US will generate an expected charge of €81 per FEU on a Maersk ship, while Hapag-Lloyd forecasts a charge of €9 per TEU for North Europe to the US East Coast.

The surcharge will be levied quarterly on cargo owners from the first quarter of next year, with shipping required to pay for allowances covering 40% of greenhouse gas (GHG) emissions in 2024, rising to 70% in 2025 and 100% from 2026.

Shipping companies from 2024 will be required to buy one European Union Allowance (EUA) for every ton of reported CO2 emitted and submit it to the EU each year. The EUAs can be purchased on exchanges such as the Intercontinental Exchange, the European Energy Exchange and the Nasdaq, as well as on the over-the-counter market between carriers and customers.

The maritime industry’s cost of compliance with the ETS will be more than $3.2 billion in 2024 and could rise to $9.1 billion in 2026, according to calculations by Hecla Emissions Management. Volatile pricing expected While the ETS surcharge amounts for 2024 appear relatively small, Maersk warned in its advisory that the EUAs traded in the ETS could be volatile because of supply and demand factors.

“The price of the EUA is considered be around €90 for the purpose of calculating estimates,” it said. “The emissions surcharge will be updated every quarter to align with the changes in EUA price.”

Hapag-Lloyd also emphasized that the surcharge levels were based on estimated EUA prices and could change quickly, adding that the applied ETS values would largely depend on the particular port combinations.

Both carriers noted that the ETS surcharge will be clearly identified and separated from the freight rate, with the charge based on a formula that combines ETS-relevant CO2 emissions with market prices for EUAs.

The ETS forms part of the “Fit for 55” proposals that aim to deliver on Europe’s Green Deal climate law that targets the reduction of net GHG emissions on the continent by 55% by 2030 compared with 1990 levels, and to make Europe climate-neutral by 2050. Shipping contributes 13% of Europe’s overall transport GHG emissions.

Revenue generated by the ETS will be channeled into the maritime sector to support its transition to alternative energy sources. At least 20 million ETS allowances, which correspond to $1.6 billion under the current ETS carbon price, will be allocated to maritime projects under the EU Innovation Fund.
· Contact Greg Knowler at greg.knowler@spglobal.com.