Last week’s average settlement price in the EEX spot market was approx. EUR 93, or USD 105, per tonne emitted CO2. Using four commonly traded tanker routes to exemplify, we see that a carbon cost at this level would lead to a substantial increase of freight rates:

Emissions and carbon cost related to four commonly traded tanker routes

MR vessel from Riga / Amsterdam ‍

Emissions: 700 tonnes of CO2
Added carbon cost: USD 73 500 **
Percentage of freight rate: 17 %
Added carbon cost per tonne cargo: USD 2.0

Intermediate vessel Riga / Amsterdam

Emissions: 450 tonnes of CO2**
Added carbon cost: USD 47 500
Percentage of freight rate: 19 %
Added carbon cost per tonne cargo: USD 3.8

MR vessel Antwerp / New York

Emissions: 1 700 tonnes of CO2
Added carbon cost: USD 89 500*
Percentage of freight rate: 10 %
Added carbon cost per tonne cargo: USD 2.4

VLCC vessel from US Gulf / UKC

Emissions: 4 700 tonnes of CO2
Added carbon cost: USD 247 000***
Percentage of freight rate: 15 %
Added carbon cost per tonne cargo: USD 1.0

According to the current revision of the European Emissions Trading System (EU ETS), only 50 % of emissions from global EU voyages would be included in the scheme, whereas 100 % of emissions from internal EU voyages and 100% of port stays in the EU would be included. This is reflected in the above numbers.

New EU suggestion: ETS could cover 100 % of emissions from global EU voyages

In a new draft, an EU Parliament committee suggests that 100% of emissions from global EU voyages could be included in the scheme.  In that case the carbon cost in our extra-EU voyage examples would increase substantially.

MR vessel from Antwerp / New York

Added carbon cost: USD 179 000
Percentage of freight rate: 19 %
Added carbon cost per tonne cargo: USD 4.8

VLCC US Gulf / UKC

Added carbon cost: USD 494 000
Percentage of freight rate: 31 %
Added carbon cost per tonne cargo: 1.9 USD

The final design of the expansion of the ETS to the maritime sector is not yet decided upon. The phase-in of the sector will however start in 2023 leaving companies with little time to prepare.

Commercial decarbonisation of the maritime industry

Carbon reporting is a good place to start if you want to prepare for the coming EU ETS exposure and to understand the carbon exposure of your chartering decisions. There are great emissions reduction opportunities in commercial decarbonisation of the maritime industry. Therefore, we have developed a Siglar carbon standard reporting system, gathering the data you need to understand and mitigate your carbon cost exposure, and to map the opportunities that lie within your commercial decisions.‍

* Emissions from a modern MR vessel transporting 37 000 tonnes of gasoline from Antwerp to New York, ballasting from New York. Number includes 50% of emissions from laden leg and ballast from New York and 100% of emissions from port stay in Antwerp.

** Emissions from a VLCC transporting 260 000 tonnes of crude oil from US Gulf to UKC, ballasting from Rotterdam. The number includes 50 % of emissions from laden leg and ballast from UKC and 100% of emissions from port stay in Rotterdam.

*** Emissions from a modern MR vessel transporting 37 000 tonnes of gasoline from Riga to Amsterdam, ballasting from Le Havre. The number includes 100 % of emissions from laden leg and ballast from Le Havre and 100% of emissions from port stay in Riga and Amsterdam.

*** Intermediate vessel transporting 12 500 tonnes of gasoline from Riga to Amsterdam, ballasting from Le Havre. The number includes 100% of emissions from laden leg and ballast from Le Havre and 100% of emissions from port stay in Riga and Amsterdam.

Source: Siglar Carbon