The COP26 – the UN climate change conference – has started a global movement around climate change and actions against it. While shipping and ferry operations are essential partsof global supply chains and travelling, they are also a growing contributor of carbon emissions. The share of carbon emissions from shipping out of total carbon emissions from human activities is close to 3%.
With ETS, the EU will be the first governmental organisation to introduce an incentive for shipping companies to accelerate the move to sustainable operations, creating an incentive for the industry to increase investments in new technologies and shifting to new fuels to reduce its environmental impact.
Impact on customers
Shipping companies need to purchase emission allowances from the EU while also investing in alternative fuels and new technologies. ETS will have a significant impact on the cost base for the industry and the increased cost will need to be absorbed by the market.
With shipping in ETS starting next year, Stena Line will introduce a surcharge towards all customers in January 2024. This surcharge will be specified towards customers for best transparency. As the launch of ETS approaches, more details will become available from the EU and Stena Line will gradually inform customers regarding the anticipated effects.
Stena Line’s shift to sustainable shipping
Stena Line is committed to a shift towards new fuels for the fleet, as well as taking action to reduce the environmental impact in ports and other parts of the business. The first step in decarbonizing the Stena Line vessel fleet will rely on improved energy efficiency measures and biodiesel. This will continue together with the uptake of sustainable methanol for converted vessels. The long-term perspective will be governed by battery electrification with a share of cost-competitive sustainable liquid fuel at routes more challenging to electrify.
Introducing a degree of biobased fuel from sustainable sources is the most viable action to achieve a positive impact on emissions in the short term. Stena Line is working closely with Stena Teknik and Stena Oil to secure that these fuels are compatible with the fleet of vessels, aligned with regulatory requirements as well ensuring future supply of viable sustainable fuel.
In 2022, Stena Line entered a partnership with Liquid Wind for the development of new supply chains for a carbon neutral methanol fuel. Stena Line is confident that also battery electric propulsion will play an important role in the future and discussions are ongoing with authorities and other stakeholders around the development of the necessary infrastructure for electric charging. The co-operation with Stena Teknik will also help to keep track of state of the art of battery development.
A new generation of modern Stena Line E-Flexer ro-pax ferries meeting the demands from both freight customers and passengers is gradually being launched into the fleet, introducing a range of new design features and innovations that has a significant positive impact on fuel consumption and emissions.
Stena Line is also moving to shore power supplied with carbon neutral electricity to reduce fuel consumption and emissions while in ports, with positive effects both for carbon emissions and the local environment.
A closer look at the emissions trading program
ETS is a cap and trade scheme where a limit (the cap) is placed on the amount of specific pollutant emissions and obliges us as a company to hold an allowance for each ton of CO2 or other carbon equivalent gases we emit. The money from the sales of allowances will be used for EU’s green fund.
The ETS will in the start phase cover CO2 and eventually incorporate also nitrous oxides, soot and methane emissions – these will be included in the ETS scope using a certain calculation method.
There will be no set price list for these emission allowances – instead, the price will be defined by supply and demand on the market. As the supply side of these emission allowances will gradually be reduced to support the 2050 goal of net zero emissions, emission allowances will be increasingly costly, putting an even higher pressure on shipping companies to accelerate efforts to reduce their environmental footprint.
As for the scope of ETS, the new legislation will include 100% of emissions for voyages within the EU, 50% of the emissions from voyages starting or ending outside of the EU, and all emissions that occur when ships are at berth in EU ports.
The UK has notified that they will eventually introduce a similar system which would have an impact both on UK domestic routes and UK-EU routes.
To allow for a smooth transition to ETS, shipping companies will during an initial phase-in period purchase allowances for a portion of their total emissions, 40% in 2024, 70% in 2025 and eventually reaching 100% in 2026.
More details on the EU ETS can be found on the EU Commission website.