The UK government is exploring an expansion of its Emissions Trading Scheme (ETS) to include international shipping routes, a move that could reshape the maritime sector’s approach to decarbonization. Originally planned to cover domestic shipping only, the latest consultation proposes extending the scope to voyages between the UK and the European Economic Area (EEA), including EU countries, Iceland, Liechtenstein, and Norway.
This shift reflects the growing recognition of shipping’s significant contribution to greenhouse gas (GHG) emissions and the urgent need to align maritime practices with national net-zero goals and global climate commitments.
Maritime Emissions and the Push for Decarbonization
Shipping currently accounts for 20% of the UK’s transport-related GHG emissions, highlighting the sector’s pivotal role in achieving climate targets. Despite this, progress has been slow. The Climate Change Committee recently noted that the UK lacks credible policies to reduce maritime emissions in line with its net-zero objectives.
The proposed expansion of the ETS aims to address this gap. By requiring shipping companies to purchase carbon credits for international voyages, the policy introduces financial incentives to adopt low-carbon technologies and practices. Revenues generated could further support decarbonization initiatives within the sector.
Learning from the EU
The UK’s consultation comes on the heels of the EU’s own ETS expansion to maritime transport, implemented in January 2023. The EU framework requires shipping companies to account for 50% of emissions from voyages outside the bloc, offering a model for the UK’s approach.
However, the EU’s rollout faced challenges, such as the need for robust digital monitoring and reporting systems and addressing concerns around double payment. The UK aims to learn from these lessons, ensuring that its scheme avoids redundancies and aligns seamlessly with global systems under consideration by the International Maritime Organization (IMO).
The UK Chamber of Shipping has emphasized the importance of reinvesting ETS revenues into decarbonizing the sector and implementing phased adoption to support a smoother transition.
The Case for International Emissions Inclusion
While the consultation marks a positive step, experts stress the need for a comprehensive approach that goes beyond emissions pricing. Jon Hood, UK Sustainable Shipping Manager at Transportation & Environment, advocates for a clean maritime plan that integrates caps on emissions, mandates renewable fuels, and promotes technologies like shore power and electrical propulsion.
Including international emissions within the regulatory framework is critical for meaningful progress. With over 40% of the UK’s foreign trade linked to the EU, extending the ETS to cover these voyages reflects the interconnected nature of global trade and the importance of collaborative climate action.
The Potential of a Clean Maritime Plan
For the UK to align its maritime emissions with the Paris Agreement’s climate goals, significant reductions are required. Hood’s modeling indicates that a one-third reduction in emissions by 2030 is necessary, with near-total elimination by 2040. Achieving these targets will require more than carbon pricing; a robust, sector-wide plan is essential.
Key elements of such a plan should include:
- Capping Emissions: Establishing strict limits on maritime GHG emissions to drive decarbonization.
- Renewable Fuels: Mandating the adoption of hydrogen-based and other renewable fuels to phase out fossil fuels.
- Electrification: Promoting electrical propulsion systems and shore power for cleaner port operations.
- Strategic Revenue Use: Allocating ETS revenues to support the development of low-carbon infrastructure and technology.
VURDHAAN’s Role in Maritime Sustainability
VURDHAAN has been actively involved in helping maritime stakeholders transition toward sustainable practices. By providing expertise in areas such as the EU MRV (Monitoring, Reporting, and Verification) and Clean Shipping Index, VURDHAAN enables shipping companies to comply with emerging regulations and adopt innovative solutions.
As the UK navigates the complexities of expanding its ETS, VURDHAAN supports operators in understanding their obligations and leveraging opportunities to improve operational efficiency while reducing emissions.
Challenges and Opportunities
The UK faces several challenges in implementing an expanded ETS. These include ensuring compatibility with EU regulations, avoiding double payments, and establishing a robust digital monitoring system. Additionally, addressing the higher costs of adopting low-carbon technologies and fuels will require government and industry collaboration.
Despite these hurdles, the consultation presents an opportunity to establish the UK as a leader in maritime sustainability. By learning from the EU’s experiences and incorporating insights from stakeholders, the UK can create a framework that drives meaningful change while fostering innovation and competitiveness.
Toward a Sustainable Future
The inclusion of international emissions in the UK’s ETS marks a significant step toward decarbonizing the maritime sector. However, this is just one piece of the puzzle. A holistic strategy that combines regulatory measures, technological innovation, and targeted investment will be essential to achieving net-zero emissions.
As the consultation progresses, it offers a chance for stakeholders to shape a policy framework that balances environmental goals with the practical realities of the shipping industry. With the right approach, the UK can demonstrate global leadership in tackling maritime emissions and advancing a cleaner, greener future for the sector.
Conclusion
The proposed expansion of the UK’s Emissions Trading Scheme signals a shift in the country’s approach to maritime emissions. While challenges remain, the consultation lays the groundwork for a more comprehensive and impactful policy. By addressing gaps in the current framework and fostering collaboration between stakeholders, the UK can position itself at the forefront of maritime decarbonization efforts.
The path to net-zero shipping is ambitious, but with proactive measures and innovative thinking, the sector can achieve a sustainable transformation that benefits both the environment and the economy.