IVL Swedish Environmental Research Institute

EU recently decided to include shipping, meaning all intra-European shipping and50% of extra-European voyages, in the EU Emissions Trading System (ETS)beginning in 2024. This article provides an early assessment of the impacts of theEU ETS on the shipping sector’s potential reductions in greenhouse gas emissionsfor different types of ships. It further examines selected mitigation measures andthe impact on modals split and costs. The study employs a mixed-methodsapproach  combining  quantitative  estimates  (based  on  data  from  the  EUmonitoring,  reporting  and  verification  system)  with  qualitative  data  andinformation from interviews with key actors and from previous literature.

This approach aims to provide a comprehensive understanding of the impacts of theEU ETS. The inclusion of shipping in the EU ETS is expected to introduce significantincentives to reduce emissions. We estimate that switching to bio-methanol at anemissions allowance price of€90–100/tCO2will be cost-effective for a minor shareof shipping segments (representing about 0.5-5% of all ships), whereas at a priceabove€150/tCO2it could be cost-effective for a considerable share (potentially75%) of ships. In the short term, the costs incurred by the EU ETS will be passed onto transport customers as a surcharge. The increased cost may, unless properlyaddressed, drive carbon leakage. Meanwhile, a modal shift away from shippingmay occur in the roll-on, roll-off(RoRo) and roll-on passenger (RoPax) segmentsdue to direct competition with road and rail transport and the relative ease ofshifting to other modes of transport.