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Argus Media: EU ETS could push shipping costs up by $4,000/d

01 Oct 2020

Nicolas Kyriakoglou of global energy and commodity price reporting agency Argus Media on Tuesday (22 September) published an article on the legal and cost implications of the EU ETS on the maritime industry as well as some possible alternative bunker fuels that shipowners would uptake to maintain compliance and competitive prices:

The inclusion of shipping in the European Emissions Trading System (EU ETS) could boost costs for shipowners by as much as $4,000/d, as well as increasing pressure on the industry to decarbonise and shift toward greener fuel alternatives, investment firm Clarksons Platou Securities said (Clarksons). 

An Aframax tanker could add up to $4,000/d in costs to meet emissions criteria, assuming a 40t/d bunker consumption, emissions of 3.1t of CO2 per tonne of fuel oil consumed at an emissions certificate price of €30/t, Clarksons said. This additional cost would be significant for shipowners trading in the spot market, as operating costs alone for an Aframax tanker are around $6,700/d, Clarksons data show.

The decision of the European Commission to include shipping has also created uncertainty around how the cap-and-trade system would apply to shipowners trading in Europe. Voyages between two European ports would be “100% subject to the ETS”, the firm said. But it remained unclear if the ETS would apply to voyages where only the loading or discharge port is in Europe and if so, whether the whole voyage would be counted or just the portion in European waters.

The uncertainty around the exact EU ETS mechanisms as they relate to shipping has also been a factor in depressed vessel orders. “A wait-and-see attitude has developed in recent years but the commission’s plans seem likely to accelerate decision making” in the industry to find alternative propulsion technologies and cleaner fuels, according to Clarksons. 

LNG will likely be the “transition fuel” for the next decade, while ammonia and hydrogen are becoming increasingly “realistic” options, the firm said. Advances in technology will ultimately be tied to new vessel orders. Older vessels are becoming less attractive because of their relative inefficiency, which could incentivise more scrapping in the next few years. Slow-steaming may also be employed to reduce consumption, which would be positive for shipowner earnings, but this strategy also has its limitations as ship efficiency declines further below certain speeds.

Photo credit and source:
Argus Media
Published: 1 October, 2020


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