European Commission Releases Green Transition Proposal

After two years of preparation, the European Commission last week finally released its proposal for guiding shipping in the green transition with the goals of 2050 in mind. This, say environmental analysts, is the first extensive legislative blueprint for the role of shipping in the green transition and helping to transform the world economy into a sustainable one that relies on sustainable fuels rather than fossil fuels. As part of the European climate accord, the proposal is aimed at fighting global climate change by curbing greenhouse gas (GHG) emissions with the guidelines provided by the European Commission. Among the defined targets, the EU intends to reach a 55% reduction in GHG emissions by 2030 and a climate-neutral European economy by 2050. Because of the 55% reduction aim, the climate package has been called “Fit for 55”. Broadly speaking, the proposal is built on two columns requiring that (1) shipping be incorporated into the EU’s carbon quota trading system called the Emissions Trading System (ETS) which includes a carbon cap on emissions and assigns a price to emitting environmentally dangerous gases and (2) shipping be required to transition from fossil fuels to sustainable fuels over the coming years.

Companies regulated by ETS will be required to pay a scaling fee if they produce pollution above their expected limits. The European Commission proposal requires ETS to cover energy usage in shipping on traffic within the EU when vessels are berthed at a EU port while also including 50% of energy consumption on traffic to and/or from the EU. The proposal also involves a scaled timetable for carriers to take steps to convert their fleets from fossil fuels to sustainable fuels by progressively reducing carbon intensity over time, starting from 2025 and ending in 2050, by which time carbon intensity in marine fuels must have been cut by 75%. The proposal has pointedly avoided prescribing any specific technologies to use to allow carriers the flexibility to choose when and how to use any available green technologies as they develop and/or change in economic viability.

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