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Maersk: Possible Significant Customer Surcharges Due to Proposed EU Emissions Trading System (ETS).

London, Tuesday, 19 July 2022

Maersk gave clients an expert assessment on the potential effects and costs for shipments beginning in January 2023 as the European Union neared finalising its plans and adopting its emissions trading system. The shipping behemoth concedes that important legal issues about shipping's inclusion in the EU Fit for 55 items still need to be resolved, but warns that shippers will likely incur large fees.

Maersk summarises for clients the developments and existing discrepancies in the EU plans while highlighting the likelihood that the EU regulations will be the first to go into effect. They acknowledge that other jurisdictions are also considering comparable policies, but they anticipate that the EU will not only be the first but also have more significant effects. "The EU regulations have a significant extra-territorial component that could have an impact on cargo travelling outside the EU's boundaries.

Maersk draws assumptions about how the ETS "cap-and-trade" system would take effect and how it will affect shipping based on the European Commission's version of the law since the specifics are still being debated between the various bodies. They pointed out that the idea calls for an emissions cap that is gradually lowered as businesses purchase or assemble allowances. "The price of the allowances is not fixed, but varies depending on the supply and demand of emission allowances on the market."

Maersk developed a model for the prospective expenses and what would be passed down to shippers based on the most recent developments between the European Parliament and the Council of the European Union. The European Union Allowance (EUA) is assumed to cost roughly EUR 90 ($91.30 at the current exchange rate) in the model.

Maersk estimates the cost impact on dry cargo to be between $100 and $200, depending on the distance and other variables. The average surcharge for dry cargo carriers is estimated to be close to $160, with shipments from Northern Europe to Asia costing the least and those between the West Coast of South America and Europe costing the most.

Beginning in January 2023, reefer shippers should anticipate an even higher cost. With a range of from $150 to $325, the average is projected to be $235. The same paths as with dry goods are used for the high and low.

"The cost of complying with the ETS will probably be high, which will affect shipping costs. As the updated regulation takes effect, it is anticipated that the volatility of the European Union Allowance (EUA) traded in ETS may rise, according to the expert opinion written by Sebastian Von Hayn, Head of Network & Market Asia/EU. We intend to apply these charges as a standalone fee starting in Q1 2023 in order to ensure transparency.

Maersk emphasises the significant gaps between the alternatives because it anticipates that a political compromise won't likely be found until later in 2022. For the purposes of their modelling, they used the European Parliament, which does away with the phase-in period, meaning that the requirement to buy allowances would be immediate as opposed to the other draughts, which started at 20% in 2023 and rose incrementally over the following three years to 100% in 2026 and beyond. The ideas also differ depending on whether the cap-and-trade limitations simply apply to CO2 allowances or also take methane and nitrous oxide into consideration.

Additionally, Maersk points out that the rates are related to the ship and not the cargo, making trip preparation even more crucial. Additionally, other suggestions demand for all journeys to be considered, regardless of whether they start or terminate in a non-EU port.

Given the divergent positions on issues such as the phase-in period, the percentage for voyages between EU and non-EU ports, the start date for carbon pricing, as well as other non-logistics related issues, Maersk warns customers that it will take some time for the negotiations to be completed before the specifics of the EU Fit for 55 package and its effects on shipping are determined.

(Source: European Commission, Maritime Executive // Edited by: The Decision Maker - Maritime editors)


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