Policy & Compliance
Drewry managing director Philippe Damas published an article on LinkedIn analysing the expected costs of EU environmental regulations to decarbonise shipping, namely the inclusion of maritime emissions into the EU Emissions Trading System (ETS), the FuelEU Maritime Regulation, and the revision of the Energy Taxation Directive (ETD) The cost of decarbonisation
standard. Already there are two such standards, the first being Authorised Economic Operator (AEO) certification which is relevant at a corporate level, while for the individual employee there is a Customs Competency Standard. The latter aligns with AEO, ensuring that individuals have a broad knowledge of Customs procedures. Diminished importance The other concern about these changes is that by making facilitations more widely available to the trader, there is the potential to diminish the importance of certain authorisations such as AEO. Recent history suggests that as, for whatever reason, government weakens checks on traders at the point of clearance, there is an increase in post-clearance enforcement processes. More information regarding the Spring Budget of 2023 can be found at: www.bifa.org/news/articles/2023/ march/spring-budget-2023- changes-to-customs-measures
A s it stands, the EU ETS approval by the parliament and the council is pending and the FuelEU Maritime and ETD have not yet been agreed by the institutions. Drewry estimates that on the major Asia-North Europe route, these combined policy measures will increase bunker costs and emission-related taxes or allowances from $312 per 40 ft container for very low sulphur fuel oil (VLSFO) today to $568/40 ft using VLSFO, or about $458/40 ft using methanol, a low-carbon fuel. These represent estimated increases in bunker costs of at least 47% on this route for ocean carriers and – over time – for exporters and importers. Importantly, they are also expected to give methanol- powered ships, by 2026, a cost advantage of $110 per 40 ft over vessels powered by conventional, more polluting fuels, when sailing to and from Europe. New environmental regulatory and tax
changes also have contractual implications for shippers. Philippe Damas reported that many customers are being asked by ocean carriers to add a clause in their contracts providing that carriers are allowed to pass on the cost of new EU regulations to the shipper/customer. However, it is still very difficult to estimate the exact costs of the new environmental regulations. As noted by the International Transport Forum (ITF www.itf-oecd.org) in its report on carbon pricing in shipping, this would largely depend on market conditions and bunker fuel price over time. Effective capacity could be affected either by slow steaming (increasing transit times) or by shorter routes (decreasing transit times), while a very low demand for ocean freight might deter ocean carriers from passing on certain extra costs. BIFA would like to thank CLECAT for allowing the reproduction of this article.
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