Maersk warns of customer surcharges as a result of EU’s ETS

Denmark-based shipping company Maersk has warned of customer surcharges in 2023 as a result of the EU’s implementation of the Emissions Trading System.

Maersk acknowledged that key points of the legislation for shipping still awaited resolution before they are incorporated into the EU “Fit for 55” packages. However, Maersk said that the costs for shippers were likely be significant.

Maersk recognized that other jurisdictions were exploring similar measures, the EU was expected to be first and to have more far-reaching consequences. “The EU measures carry a large degree of extra-territoriality potentially affecting cargo moving outside of the EU’s borders”, said Maersk.

Based on the European Commission’s version of the legislation, Maersk makes assumptions on how the ETS “cap-and-trade” system will come into effect and how it will impact shipping. They noted that the concept called for the emissions cap which would be lowered over time, with companies buying or assembling allowances. “The price of the allowances is not fixed, but fluctuates according to the market demand and supply of emission allowances.”

Based on the latest developments between the European Parliament and the Council of the European Union, Maersk presented a model for the potential costs and what would be passed along to shippers. The model uses the assumption that the price of the European Union Allowance (EUA) would be about €90.

Looking at the cost impact on dry cargo, Maersk put the range of impact at between $100 and $200, based on distance and other factors. The average surcharge for shippers of dry cargo was estimated at nearly $160, with the highest cost on shipments between the West Coast of South America and Europe, while the lowest would be on the trip from Northern Europe to Asia.

The average surcharge for reefer shippers from January 2023 is estimated at $235, with the range between approximately $150 and $325.

To ensure transparency, Maersk plans to apply these costs as a standalone surcharge, effective Q1 2023.”

“The cost of compliance with the ETS will likely be significant, therefore impacting the cost of shipping. It is expected that the volatility of the European Union Allowance (EUA) traded in ETS may increase, as the revised legislation comes into effect,” the expert opinion – which was authored by Sebastian Von Hayn, Head of Network & Market Asia/EU – concludes.

Recognizing that it would be later in 2022 before a political agreement was likely to be reached, Maersk highlights the main differences in the versions. For the purpose of their modelling, they used the European Parliament that abolishes the phase-in period, meaning that the obligation to purchase allowances would be immediate, versus the other drafts that start at 20% in 2023 and in the three subsequent years rise incrementally, reaching 100% in 2026. The proposals also vary if the allowances only pertain to CO2 or also include methane and Nitrous Oxide in the cap-and-trade limits.

Maersk also notes that the charges are linked to the ship, rather than the cargo, making voyage planning even more critical. Some proposals also call for all voyages to be included regardless of if they are departing from a non-EU port or ending outside the EU.

Maersk advised customers that the negotiations will take some time before the details of the EU Fit for 55 package and its impact on shipping were finalized.