Europaudvalget 2020-21
EUU Alm.del Bilag 340
Offentligt
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Annex I:
The Danish Government’s position on
the revision of the Emissions
Trading System in relation to maritime transport
Minimise carbon leakage and maintain a global level playing field
One critical aspect to minimise carbon leakage and ensure a global level playing
field and safeguard the competitiveness of the European maritime industry is apply-
ing flag neutrality as a fundamental design choice of the ETS, meaning all ships are
treated equally irrespective of their country of origin, as is the case for the Regula-
tion on Monitoring, Reporting and Verification (MRV). If only ships carrying the flag
of an EU Member State are included in the EU regional measure there is a consid-
erable risk that ships will change to a non-EU flag or that non-EU ships will take
over routes.
Furthermore, the question of efficient enforcement (more on administration and en-
forcement below) and sanctioning of non-compliance from non-EU flags should be
addressed, especially for ships leaving EU ports. Therefore, efficient sanctions for
non-compliance need to be evaluated, alongside the adequate enforcement re-
quired to ensure equal treatment of ships in the entire EU.
Today, all ships operating in the EU are covered by the MRV regulation on equal
terms, and thus using the current MRV deadweight minimum of 5,000 GT for ships
covered should also be considered when designing an EU ETS for shipping in or-
der to ensure a level playing field. The latest MRV report from the Commission
(2019) concluded that with the aforementioned minimum deadweight, 90% of emis-
sions will be covered even though only 55% of ships are 5,000 GT or more.
Support global level measures within the IMO and avoid double regulation
We encourage the Commission to explore how a phased approach, where only in-
tra-EU/EEA
journeys are included from the start, could ease shipping’s inclusion
into the system in order to support the process towards a global measure at the
IMO. This would entail a first phase where only intra-EU shipping is included in an
ETS in order to send a signal to the IMO, that if the IMO does not take swift ambi-
tious action by implementing Market-Based Measures (MBMs), the EU ETS for
shipping could, in its second phase, be expanded to also include international ship-
ping to and from EU.
We urge the Commission to take into account the work in the IMO and important
principles in the Initial Strategy on the Reduction of Greenhouse Gas Emissions
from Ships when designing an EU ETS. In our view, the choice of whether the sys-
tem is closed (shipping’s emissions are only traded in-sector)
or open (allowance
trading across all sectors in the EU ETS) could impact the IMO process negatively.
An ETS for intra-EU navigation could be open, since IMO compatibility would still
be possible due to the separation of journeys within the EU and journeys to/from
the EU. If journeys to/from the EU are also included in the ETS, the ETS for ship-
ping could be established as a closed system (only trading of allowances within the
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EUU, Alm.del - 2020-21 - Bilag 340: Notat og høringssvar om Kommissionens offentlige høringer vedr. revision af EU’s kvotehandelsdirektiv, byrdefordelingsforordning, LULUCF-forordningen og forordningen om CO2-standarder for lette køretøjer
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sector), which would ensure in-sector decarbonisation and at the same time uphold
the principle of the Initial IMO GHG Strategy that shipping can and has to decar-
bonise in-sector. EU Member States and the Commission fought hard to include
this principle in the Initial IMO GHG Strategy, and jeopardising the ambition of the
Initial Strategy will undermine the EU’s global green leadership.
Moreover, we encourage the Commission to consider introducing a conditioned
sunset clause in its proposal for an ETS for shipping in order to avoid double regu-
lation at the EU and the IMO. The sunset clause could stipulate that if the IMO
adopts an ambitious MBM, the EU ETS for shipping should be able to function as
an integral part of such a global system or
if that is not possible
either be limited
to intra-EU journeys or be phased out.
Incentivise innovation and first-movers and ensure an accurate baseline
The Danish Government finds that an ETS model should help foster incentives for
the deployment of new technology and alternative fuels and that it must be ensured
that first-movers, who have invested heavily in green solutions, are not penalised
with the introduction of an ETS for shipping. Ensuring the necessary innovation in
the decarbonisation of the maritime sector requires holistic EU action. The Danish
Government welcomes the Commission’s initiative on FuelEU Maritime, which
needs to be taken into account
in shipping’s decarbonisation pathway. Moreover,
ensuring investments and funds for maritime R&D projects will need to be priori-
tised.
The choice of an accurate base year or the calculation of benchmarks that take into
account the most CO
2
efficient ships could have a positive impact on first-movers.
Consequently, different methods for calculating an appropriate baseline should be
explored. This can be ensured by taking into account the most CO
2
efficient ships
and account for the characteristics of different types of ships. The right starting
point could increase shipping companies’
incentive to be first-movers. Moreover, it
could be considered that any potential allocation of free allowances should not be
based on historical data since this would also be credited to ships that have not un-
dertaken any decarbonisation efforts. Additional incentives for ships that have
acted early on should be examined, e.g. whether ships that use zero emission fuels
should be first in line at berth.
Taking the international nature of shipping and the low predictability into ac-
count
Ships operate in a global economy and in a global market, where changing route
and destination many times while underway is possible. Shipping voyages, alt-
hough they seem similar, can actually fluctuate up to 30% due to external factors
such as wind and currents. These fluctuations influence the shipping sector's view
on long-term investments. An EU measure, like ETS, should take into account the
risk of price volatility in order to ensure the needed investments in green technolo-
gies and zero-emission ships. Therefore, some kind of price stability mechanism
ensuring green investments should be considered.
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Minimising the administrative burden and ensuring transparent regulation
The Danish Government finds that a strong regulatory regime is needed in order for
an ETS for shipping to have the intended effect. This is due to the fact that ships
operating in the EU are not always registered in an EU country and they often un-
dertake very diverse trips. We find that ships could be regulated by the member
state in which the ship is registered (if registered in an EU country) or by the coun-
try in which the ship has most port calls. Companies (ship owners or operators)
could report to a specific member state, if the majority of port calls during the next
year takes place in the state. Likewise, the use of IMO standards, e.g. the ISM
standards, should be used to determine the responsible party for surrendering al-
lowances.
The administration should support the general digitalisation of the industry and po-
tential overlaps between the ETS and MRV should be combined for easing the bur-
den on the ship owner. Enforcement could be carried out by the administrative en-
tity by issuing a certificate that can be presented at port state control as proof of
compliance. This way a ship could be detained if it does not have enough allow-
ances to cover its emissions. The control and the certificate could be combined with
the MRV enforcement.
Addressing the risk for circumvention
The Danish Government encourages the Commission to take into account the risk
of circumvention of the ETS/risk of ships 'artificially' reducing the amount of allow-
ances needed by introducing extra port calls or dock or unload in a non-EU/EEA
port. This could potentially lead to inefficiency in the system or limited emission re-
ductions. The risk will most likely depend on whether the price of introducing extra
stops etc. would exceed the prices of ETS allowances.
Consider shipping within the context of an energy efficient European
transport system
If waterborne transport becomes more expensive, it could lead to shifting goods
from ship to truck, especially in short-sea and inland waterways shipping. In the
process of evaluating shipping’s inclusion
into the ETS, it is thus important to keep
in mind the likelihood of modal shifts to other forms of transportation, as they might
not benefit the overall reduction of emissions, since maritime transport is one of the
most energy efficient freight modes.
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