Sea-Intelligence has discovered that Mediterranean Shipping Company (MSC)’s network structure halves reportable sailing lengths, having a financial advantage in ETS expenses over OCEAN Alliance.
The European Union’s Emissions Trading System (EU ETS) is the de facto carbon tax on shipping in the EU.
All vessels sailing inside or to and from the EU are required to pay a carbon emission tax, which is payable on 100 per cent of emissions between two EU ports and 50 per cent of emissions between an EU and a non-EU port.
To maximise ETS savings, a vessel should call the non-EU port nearest to its first/last EU port of call.
Sea-Intelligence noted that a good way to understand the ETS savings is by comparing the ‘modified’ voyage to the shortest available benchmark for traveling across Africa, which is the sailing distance from Singapore to Algeciras.
This means that a vessel calling at a non-EU port between Singapore and Algeciras, for example, will only be required to pay ETS on 50 per cent of the emissions from that port to Algeciras, as opposed to a vessel sailing directly from Singapore to Algeciras, which must pay ETS on 50 per cent of the emissions from a much longer voyage.
READ: OCEAN Alliance shows inconsistency in carbon emissions calculations
Sea-Intelligence mapped the reportable ETS sailing distance from a non-EU to an EU port, for each service in the new alliance networks (including MSC, since it will be as large as an alliance).
This is then compared against the notional sailing roundtrip distance between Singapore and Algeciras, to calculate potential ETS savings.
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Figure 1 shows how MSC’s network structure has reduced the reportable distance between Asia and Europe by nearly half.
Gemini Cooperation and Premier Alliance will compete on an equal level, whereas OCEAN Alliance’s present network will be reduced by just 7 per cent.
This indicates that MSC will have a significant economic advantage over OCEAN Alliance in terms of ETS costs.
However, OCEAN Alliance has not yet produced an updated network for 2025. Sea-Intelligence anticipates OCEAN Alliance to release a redesigned Asia-Europe network for 2025, with an emphasis on decreasing ETS cost exposure.
