EU ETS In The Shipping Sector:
Capital Link
Investor relations, financial communications, advisory firm-14 forums : Maritime, Commodities & Energy, MLPs, CEF & ETFs
Lessons learned 6 months post-implementation
Vertis Environmental Finance – Frederic Bouthillier
Since January 2024, the EU Emissions Trading System (ETS) has been extended to the maritime sector. The first EU ETS compliance deadline (for 40% of emissions only) is September 2025 in all Member States for emissions reported throughout 2024.
Further to the publication by the EU of a list of shipping companies and their attributed Member State on 1 February, many questions and challenges have arisen for shipowners and operators.
A proactive approach has proved essential to managing potential disruptions and ensuring smooth operations. We have seen that owners who have ensured proper organisation to cover off-hire periods and positioning legs when trading vessels under voyage charters, even when receiving EUAs from charterers, have been able to optimise their compliance.
Furthermore, the EUA market has exhibited high volatility, underscoring the importance of conducting swift market reviews.
To cover all aspects of EU ETS from procurement to surrendering EUAs including market & research analysis, Vertis is finalising its service offering with its “Carbon package” which will be soon available.
Regarding the price, it is unlikely that the inclusion of shipping has had a significant impact on EUA price direction yet. On the demand side, the 2023 MRV, updated on 14 July, shows a 10.64% decrease in shipping emissions year-on-year, following the trend seen in the other ETS sectors (-15.5%). This number might change depending on the magnitude of late MRV reporting by compliance entities. To compensate for the maritime expansion, the EU allocated an additional 78.4 million EUAs in the 2024 auction, not enough to meet additional demand. However, the maritime sector is only required to comply with 40% of its verified emissions from 2024, leaving a shortfall of around 45m EUAs. While this means the current impact is bearish, it is essentially a drop in the ocean given the overall size of the market.
The market is expected to trade on a sideway to bearish trajectory in July. Hedge funds, which are important market players, have remained net short since August 2023. This is mainly driven by the bearish fundamental balance for the year 2024. On the flipside, this situation is more sensitive to upside risk stemming from warmer-than-usual weather, bullish energy markets and political turmoil.
What way forward?
Three pivotal recommendations emerge to optimise carbon compliance. First and foremost, closely monitoring emissions volume and types enables instant and precise coverage on a sea passage basis. Moreover, a comprehensive understanding of the EUA market dynamics and its primary drivers is crucial for informed decision-making. Lastly, fine-tuning procurement strategies based on individual profiles and segments, with a focus on “cost pass through”, determines the optimal timing for EUA purchases. By implementing these strategies, stakeholders can navigate the complexities of carbon compliance with confidence and efficiency.
领英推荐
To dive into Vertis' market research and analysis, and to optimise your EU ETS compliance strategy, contact our experts at [email protected]
Watch Replay here:
4th Annual Capital Link Decarbonization in Shipping Forum
July 1, 2024 | Digital Conference
Follow here for more information: https://forums.capitallink.com/shipping/2024decarbonization/
Forward-Looking Statements
Capital Link’s webinars, podcasts, and presentations may contain "forward-looking statements." Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "projects," "forecasts," "may," "will," "should" and similar expressions are forward-looking statements. These statements are not historical facts but instead represent only the beliefs of each participating Company regarding future results, many of which, by their nature, are inherently uncertain and outside of the control of the Companies. Actual results may differ, possibly materially, from those anticipated in these forward-looking statements. For more information about risks and uncertainties associated with the participating companies, please refer to the regulatory filings of each participating company with the SEC or other Stock Exchanges where they are listed.
Capital Link – Disclaimer
Founded in 1995, Capital Link provides Investor & Public Relations and Media services to several listed and private companies, including companies featured in these webinars, podcasts, and presentations. All these, including the one mentioned above, are for informational and educational purposes and should not be relied upon. They do not constitute an offer to buy or sell securities or investment advice or advice of any kind. The views expressed are not those of Capital Link, which bears no responsibility for them. In addition, Capital Link organizes a series of industry and investment conferences annually in key industry centers in the United States, Europe, and Asia, all of which are known for combining rich educational and informational content with unique marketing and networking opportunities. Capital Link is a member of the Baltic Exchange. Based in New York City, Capital Link has presence in London, Athens & Oslo. For additional information please visit: www.capitallink.com.
Contact
For more information, please email [email protected] or call +1 212 661-7566.