Europe’s Emissions Trading System (ETS):

Who will benefit?

Besides all the intended environmental effects of the implementation of Europe’s Emissions Trading Scheme for shipping, finance ministers are looking forward to new treasures coming their way. OceanScore’s analysis points to an interesting distribution of the fund-flows. Generally speaking, the majority of funds generated will be generated by the countries where the EUAs have been surrendered. Excluded are some funds that will be used for the EU Innovation Fund as well as for specific support of below average income countries in the EU. So, who are the countries receiving the EUA income?

60% of the EUAs to be surrendered are generated by shipping companies that reside within the EU. For these companies EUAs will have to be surrendered in their country of residence. Considering the countries of residence of the DOC holders, Greece will benefit the most from the new ETS related revenue streams: 20% of the EUAs to be surrendered by European shipping companies will be surrendered in Greece – 12.2mEUAs (once the ramp up to 100% surrender rate is completed), reflecting around €1.1bn at today’s prices – or around 1% of Greece’s government spending.

An interesting side note to Greece is that voyages to islands with fewer than 200.000 inhabitants are excluded from the ETS regime – so Greece as a maritime nation is benefiting from significant fund flows while at the same time protecting its maritime transport dependent islands from possible effects of increased transport prices.

Other countries following in the “EUA income ranking” are Germany with 10m EUAs, Italy with 7.8m EUAs and Cyprus and Denmark both with 4.3m EUAs.

For Cyprus this equates to a whopping 5% of government spending – more than the country’s average budget deficit over the last decade. That is significant.

40% of EUAs will be provided by shipping companies residing outside of the EU. The largest contributor is China (incl. Hong Kong) with 5.6m EUAs followed by Singapore with 5.4m EUAs, the UK with 3.5m EUAs and Norway with 3.1m EUAs.

How will their contributions change the revenue picture for European governments? Rules state that the port most frequently called will define where to register and surrender EUAs – or, if not calling EU ports before, the first port of call in Europe. Given current transport patterns, these are good news for governments especially in the Netherlands and in Belgium with their large ports in Rotterdam and Antwerp. The Netherlands – receiving 3.2m EUAs based on own DOC holders – will move past Denmark and Cyprus in the overall revenue ranking. And for Belgium the jump will be even more pronounced as they would only receive 290k EUAs from local DOCs holders but pull in significantly more through their port of Antwerp.

Given that 40% of total EUA revenues of close to €8bn will be generated through no European DOC holders, governments especially in the Mediterranean and in Benelux stand to gain big time from a fit-for-purpose monitoring system for these vessels / DOC holders.