The EU has the power to bring transformational change to global shipping

Container cargo freight ship with working crane loading bridge in shipyard at dusk.

This post was written by Panos Spiliotis, Global Climate Shipping Manager for EDF, and also appears on EDF Europe.

The European Commission’s “Fit for 55” policy package opens a powerful new opportunity to decarbonise shipping—a sector with a growing share of global emissions (roughly 3%) that is not covered by any EU climate target.

Released last week, the ‘Fit for 55’ package is the most robust policy proposal package set out by any of the world’s economies to date and signals to the international community that the EU is focused on its new target to reduce emissions by 55% by 2030. The Commission’s proposal to include international maritime transport in the EU Emissions Trading System can carry shipping a long way to a zero-carbon future; however, the policy suite fails in other ways to steer shipping entirely away from fossil fuels. Instead of kicking the can down the road, Brussels should chart a course that steers the sector away from liquefied natural gas (LNG) and toward cleaner options.

EU must stop favouring LNG
One key feature of the package, “Refuel EU,” mandates a progressive decrease in the carbon content of marine fuels. Unfortunately, the European Commission has put forward targets that will boost the use of LNG and biofuels in shipping—a pointless half-measure that will not lead to real transformative action. It is a sorely missed opportunity. If appropriately designed, the Refuel EU fuel standard could incentivize zero-carbon fuels.

Furthermore, the Alternative Fuels Infrastructure Directive (AFID), sets targets for LNG infrastructure in Europe’s core ports that are counter-productive—LNG is a fossil fuel and the associated methane leakage undermines any significant climate impact. The Commission should have taken this opportunity to turn the page on their earlier mistake by setting out a target for zero-carbon bunkering infrastructure this decade in Europe’s TEN-T core ports.

Carbon pricing, and beyond
The EU has a time limited opportunity to transform the shipping industry: under pressure from their own customers, shipping companies are shifting their strategies from resisting change to leveraging it with carbon pricing. The “Getting to Zero” industry coalition wants zero-emission vessels to be commercially viable by 2030. Green hydrogen and ammonia e-fuels—which may take the lion’s share of international shipping fuel burn by 2050—will also play a key role in decarbonizing global shipping as long as smart policy incentivizes uptake and minimises hydrogen leakage to maximize the climate benefits of green hydrogen based fuels.

The Commission’s proposal to include shipping emissions for the first time in the EU ETS—with an impressive scope covering intra-EU journeys and 50% of incoming and outgoing—begins to make headway in the formidable task of getting to zero-carbon shipping. Although the scope is ambitious, a gradual phase-in mechanism over four years means it would only really reach its full potential by 2026.

In the absence of measures beyond the EU ETS to incentivize zero carbon fuels, LNG and biofuels will become cost-competitive before green e-fuels. Almost a fifth of all new vessel orders are currently for fossil gas LNG vessels. The EU should take this moment to avoid locking the industry into an inferior fuel like LNG that can, at best, only deliver 20% emissions reductions.

Bringing international shipping into the EU ETS is a measure of success for the package, but it’s a shame that the European Commission did not fully embrace the moment to move the industry away from polluting fossil fuels. After all, we know that EU action can catalyze an international response and the International Maritime Organization’s delegations are watching closely to see how hard the EU is willing to fight for zero-carbon shipping.

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  1. Peter Nuttall
    Posted July 23, 2021 at 4:05 pm | Permalink

    Hi EDF
    Thanks for an interesting article. Can I ask you to publicly clarify EDF’s position on MBM’s for shipping and your comment that EU is being ambitious.

    In our opinion, the EU ETS will have some limited impact on moving shipping toward decarbonisation, but is clearly inadequate for a 1.5 agenda and therefore fails the Paris Agreement test. In our opinion it also completely fails any test of equity and will serve to increase the technology gap between rich and poor.

    You note the deficiencies in regard LNG but make no comment on the clear downsides for the rest of the world, in particular SIDS/LDCs. The EU proposal may have some legitimacy as a stick to pressure IMO to move faster on an international measure, however once effected it simply sets up an almost irreversible path to a patchwork of regional ETS that serve to return the revenues earned from the polluters directly to the coffers of the richest and most powerful states and denies them to the poorest and most vulnerable members of the international community. If these revenues are then reinvested by Europe in increasing the technology dominance of European industry, then it serves only to increase inequity. Given the blanket refusal of Europe and the rest of the rich world to pay its $100billion p.a., it becomes hard not to see this as neo-colonialism in its worst form.

    The simple alternative would be for the EU to throw its full weight behind the proposal of the Marshall and Solomon Islands for a universal mandatory GHG levy, with its considerable revenue dedicated to ensuring a just and equitable transition for all – or are we just saving the planet so a few entitled states can prevail?

    Big questions here for the large European NGO’s as to how you use your resources and leverage and for whose benefit in this debate.

    • Panos Spiliotis
      Posted July 28, 2021 at 9:26 am | Permalink

      Thank you for your comment. The EU ETS could have a significant impact on shipping emissions, as evidenced in the published Impact Assessment. Just how significant will depend on the policy design to be decided in the legislative process that’s about to begin. The proposed options will go through amendments and potentially further strengthened. One aspect of the policy concerns revenues, but another is that in a cap-and-trade approach like ETS – unlike a levy – a ‘hard cap’ can be set to directly drive emissions reductions. A summary of the ETS proposal and the rest of Fit for 55 can be found here: