Brexit sparks 24 per cent ETS North Atlantic savings

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Brexit causes 24 per cent ETS North Atlantic savings

According to Sea-Intelligence, Brexit has caused a 24 per cent decrease in total reportable sailing distance in the North Atlantic.

The EU ETS went into effect in January 2024, meaning that ships that visit EU ports must pay a fee on CO2 emissions.

A ship sailing between two EU ports must pay a carbon tax for the whole route, but a ship going between a non-EU port and an EU port must pay a carbon tax for half of the journey.

While it has no direct influence on Sea-Intelligence’s study, the EU requires just 40 per cent payment of the ETS tax in 2024, increasing to 70 per cent in 2025 and 100 per cent in 2026.

READ: Red Sea crisis sparks surge in Asia-Mediterranean transit times

The UK’s exit from the EU has reportedly created a loophole in the ETS. This means that UK port calls might be counted as the first or final port call before an EU port.

For example, if a vessel travels from New York to Antwerp, the carrier must report emissions for 50 per cent of the route since it is going from a non-EU port to an EU port.

However, if the same carrier makes a port stop at Felixstowe between New York and Antwerp, the carrier must pay zero ETS from New York to Felixstowe, as they are both non-EU ports and 50 per cent ETS for the extremely short route from Felixstowe to Antwerp.

© Sea-Intelligence

READ: Bearing AI unveils EU ETS compliance solution

Alan Murphy, CEO of Sea-Intelligence, said: “If we map out the port rotation of the services offered in the North Atlantic trades (i.e. liner services from North America to North Europe), we can calculate the total sailing distance for which emissions must be reported, under two different circumstances: one based on the current reality where the UK is exempt, and the other based on what the situation would have been, had the UK remained in the EU.”

Figure 1 shows that Brexit has resulted in a 24 per cent fall in total reportable sailing distance in the North Atlantic.

Murphy added: “If we dig a layer deeper and look at the individual liner services themselves, there are outlier services which are seeing reductions in reportable distances of as high as 73 per cent.

“On the whole, however, the 2M alliance gain the smallest amount of benefit with their current service network, likely impacting their cost competitiveness in this regard.”

Recently, Linerlytica reported that increased port congestion exacerbated the troubles of the overstretched container market.

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