Port of Rotterdam looks into impact of EU ETS for shipping

March 28, 2022, by Ajsa Habibic

Regarding the proposed extension of the EU Emissions Trading System (EU ETS) to the maritime sector, the Port of Rotterdam has requested the research and consulting agency CE Delft to investigate the subsequent impact on the competitive position of seaports.

To remind, last year, the European Commission (EC) proposed to extend the scope of the EU ETS to cover CO2 emissions from ships as part of the Fit for 55 package with the aim to address greenhouse gas (GHG) emissions from the sector and to ensure that shipping contributes to meeting the economy-wide emission reduction targets of the EU.

Ships could, in principle, avoid the system by changing their routes or changing the routes of their cargo. Such evasive behaviour could impact the competitive position of European seaports as well as undermine the aims to reduce the emissions from shipping, CE Delft explains.

The Port of Rotterdam believes that the extension of the ETS to shipping must take into account such potential evasive behaviour and its impact on the competitive position of EU seaports compared to non-EU ports.

With this in mind, the port commissioned CE Delft to conduct case studies on the cost-benefit analysis for five scenarios of potential port evasion, including, for example, adding an extra port from outside the EU to the trading route, or sailing to a neighbouring non-EU seaport instead of directly to an EU seaport.

The cost-benefit analysis was based on various costs, such as fuel costs and port call costs, including the ETS price based on a low/average/high estimate.

The study showed that when an extra port such as Felixstowe in the UK is added on the China-Europe route, there are potentially 18 scenarios in which port evasion can be cost-efficient for ships. This is already the case with an average ETS price of €67. In the case of a port shift from Algeciras, Spain, to Tangier, Morocco, the evasion of the EU ETS is profitable in 27 of the 36 scenarios that were studied.

CE Delft concludes that evasive behavior is realistic, even when the ETS price is relatively low (compared to the extra costs of a port call, fuel costs, operational costs, etc.).

However, this does not apply to all shipping lines. For example, operational challenges (i.e. capacity constraints) in non-EU ports also plays a role in limiting possibilities to evade the EU ETS, at least in the short term.

The report also outlines a number of ways to limit evasive behaviour. Based on the analysis, the best way to reduce the risks is to ensure that similar market-based measures are implemented at the IMO level or in countries close to the EU.

“The Port of Rotterdam is asking European policymakers to conduct a broad impact assessment into the effects of a shipping ETS on European ports before including shipping in the EU ETS. Only if shipping actually pays for the pollution it causes, more sustainable shipping can be achieved”, the port stated.