Confusion and lack of clarity abounds when it comes to implementing a carbon tax and various decarbonization proposals and goals. It’s all a game: trying to avoid costs and even making money (at least breaking even) from emission trading systems.

Decarbonization by IRENA via Flickr CC

As one knowledgeable observer noted recently, “There is little to no appetite currently among beneficial cargo owners (BCOs) to pay up for decarbonized ocean container transport. There remains a wide variance in the emission trading system (ETS) surcharge estimates by carriers that illustrates the uncertainty over just how much the carbon tax will cost the industry.”

As Greg Knowler, Europe Editor at IHS Markit Maritime & Trade, relates in a LinkedIn post, Ocean carriers will need to comply with the European Union emissions trading system (ETS) from Jan. 1, 2024, a cap-and-trade principle that has been applied to industries in Europe since 2005 and was recently extended to cover shipping. His article continues:

“A cap is placed on the amount of CO2 that can be emitted by those within the system and companies must buy carbon allowances that cover their annual emissions. These allowances can be bought on the open carbon market or traded among companies.

“From Jan. 1, for every ton of CO2 emitted by a ship, the carrier will need to buy 1 emission allowance, called an EUA, from the carbon market. The regulation will be phased in according to a progressive schedule over the next two years. In 2024, carriers will be charged for 40% of all emissions, 70% in 2025 and 100% of emissions after 2026.

“Half of journeys that begin or end outside the EU will be covered by the ETS, and all the emissions from voyages between ports in the EU and while alongside will be covered.

“There are significant costs involved for carriers. According to emissions monitoring platform OceanScore, the maritime industry in 2022 generated CO2 emissions of 126 million tonnes from voyages to, from, between and within European ports. That would have resulted in the need to surrender 82.7 million EU Allowances (EUAs), or carbon credits, under the ETS, equating to a total cost of €6.5 billion based on the current price of €78 per EUA.  

“Hapag-Lloyd CEO Rolf Habben Jansen has estimated the ETS will cost Hapag-Lloyd $100 million in 2024, with that amount tripling in the next couple of years, and he has vowed to recover those costs from customers.”

Knowler quotes Jansen: “The initial cost is there, and we will not absorb the cost, It is real and is a fully out-of-pocket cost and people must accept it. We talk about $100 extra per container, and if you look at the value of the goods that are inside, people should be able to accept that.”

Knowler writes, “It will become harder and harder for the carriers to absorb the ETS costs as they get phased in, and as the free emission allowances across all industries gets phased out and compliance gets progressively more expensive…this is the way the system has been designed. The ETS is supposed to make it more expensive so those in the shipping industry are forced to use greener fuels and services to enable the European Union to be climate neutral by 2050.”

That last concluding bit is the point of this complicated and ultimately frustrating exercise. The bottom line is that no one wants to pay for the cost of climate change except those that can’t afford it. Climate change will exact its own high costs for everyone on this planet sooner or later.

The thing about net zero emissions and decarbonization is that while intentions are well meaning (or not) companies, especially those that use fossil fuels, don’t want to pay. God forbid that their margins and profits might decrease if they implement net zero net zero actions. Better to protect shareholders than the climate. It’s disgusting, shortsighted, and deadly,

This is the real bottom line: Do the right thing. Take the financial hit for the good of the planet! You can afford it!