Carbon dioxide in the atmosphere warms the planet, causing climate change. Global energy-related CO2 emissions in 2022 reached a new high of more than 36.8 billion tons, according to the International Energy Agency. Unfortunately, most of this pollution comes from just a few countries.
For most of us, carbon dioxide remains an abstract notion. But experts say one ton of CO2 equals “the average emission of one passenger on a return-flight from Paris to New York,” or the emission created by driving 6,000 kilometers with a diesel car. Experts in climate metrics at Ecometrica said one ton of CO2 is equivalent to 138 meat-based meals.
Globally, the five countries that produced the most carbon dioxide emissions in 2022 are China (33 percent), the United States (13 percent), India (7 percent), Russia (5 percent), and Japan (3 percent). Collectively, these nations account for over 60 percent of worldwide emissions.
If the global shipping industry were a country, it would be the sixth largest producer of greenhouse gas emissions, according to the World Bank. Ocean-going ships account for more than three percent of global CO2 emissions. This is comparable to Japan’s—and the shipping industry is still growing.
About 90,000 marine vessels carry across the world’s oceans more than 80 percent of global trade. Like all modes of transportation that use fossil fuels, ships produce CO2 emissions that significantly contribute to climate change. Nevertheless, carbon dioxide emissions from these vessels are currently unregulated.
“Ships carrying everything from consumer goods to food and fuel in and out of the European Union will soon face hefty emissions bills. The maritime industry will join the bloc’s Emissions Trading System in January, meaning big ships will start paying for carbon emissions. Some major freight firms—such as MSC Mediterranean Shipping Company SA and A.P. Moller-Maersk A/S—could see costs run into hundreds of millions of dollars,” according to BloombergNEF.
Bloomberg said the incoming system is the world’s first large-scale carbon charge for international shipping, and part of the bloc’s green push to tackle climate change.
“The EU ETS will increase the freight rates,” said Tore Longva, decarbonization director at ship classification society DNV. But vessel supply and demand is likely to have a bigger impact on shipping rates, he said.
For a single container ship sailing between Europe and Asia, the emissions cost could total about €810,000 ($864,500) next year, assuming a carbon market price of €90 a ton, according to DNV. Firms will have to cover a greater share of emissions in the following two years—meaning costs should go even higher.
Bloomberg showed how it will work: “A vessel carrying 5,000 standard-sized containers between the EU and Asia over a year generates about 40,000 tons of CO2. But because the journeys stretch outside Europe, only half the emissions need to be covered. That means incurring a cost for 20,000 tons of CO2, plus an extra 2,500 tons while the ship is in European ports. In the first year, 40 percent of the qualifying emissions are chargeable, so that ship would face costs for 9,000 tons of CO2. Assuming a carbon price of €90 a ton, that’s €810,000. That would rise to €1.4 million in 2025 when 70 percent of emissions must be covered, and €2 million in 2026 when all emissions are chargeable (assuming a €90 carbon price). The regulation covers ships of 5,000 gross tonnage and above and applies to vessels going into—and out of—EU and European Economic Area ports.”
The integration of the shipping industry into the EU ETS represents a significant milestone in the pursuit of a sustainable maritime sector. By imposing emission monitoring and introducing economic incentives, the EU ETS facilitates transparency, accountability, and environmentally responsible practices within the shipping industry.
The bloc hopes this will incentivize companies to reduce emissions, encourage innovation, and contribute to the global effort to combat climate change.
Will the global shipping industry go green all the way in 2024?
“It could take a while for the program to really cut emissions. At a carbon price of about €90, it would still be cheaper to use polluting oil-based fuels and pay for the emissions rather than use more expensive marine biofuels,” DNV’s Longva said.
Pundits agree that while the additional costs are notable, shippers have seen big swings in fuel prices in recent years that far outstripped the looming carbon charges. One thing is certain, though: They will go green when they feel the pain.