Shipping giants are exploiting the EU’s CO2 emissions market (ETS) to boost their profits, according to a new study by Transport & Environment (T&E), the independent European environmental group. The analysis, which takes into consideration a sample of over 500 trips, coming from and going to the main European ports, shows how in almost 90% of cases the shipping companies are charging customers higher costs than those from them supported to adapt to the EU ETS. An extreme case, for example, is that of the Danish company Maersk which will likely make more than 300,000 euros in extra profits for a single trip. According to T&E, therefore, the economic compensation measures introduced with the ETS system would not be inducing companies to boycott European ports. Far from wanting to avoid the cost of their emissions, shipping companies seem to have found a way to benefit significantly from them.
Companies profit from the ETS. The ETS for maritime transport came into force on 1 January this year and since that date shipping companies have applied an ‘ETS surcharge’ which is charged to the customer. The EU Directive provides for a gradual entry into force of the taxation mechanism: in 2024, ships will have to pay only 40% of their emissions, rising to 70% in 2025 and reaching 100% only in 2026.
Southern European governments have raised objections, fearing that the ETS could drive commercial traffic away from their ports, pushing companies to choose ports on the other side of the Mediterranean, in North Africa, excluded from compensation measures for climate-changing emissions . T&E’s analysis, however, shows that shipping companies are unlikely to evade the ETS, at least until they find a way to profit unjustifiably from it.
Carlo Tritto, policy manager at T&E Italia, said: “Maritime transport giants are exploiting environmental measures for their own gain, charging customers a premium that is even higher than what they have to pay to comply with the ETS. It is paradoxical that a compensation measure for the damage caused to the climate becomes an opportunity for extra profit. All the governments of Southern Europe, including the Italian one, which raised strong objections to the extension of the ETS to sea transport, fearing to see the piers of their ports desertified, made a spectacular mistake. To date, reality shows that shipping companies are benefiting enormously from this measure.”
The overestimation of the ETS earns companies up to 60,000 euros each way on average. T&E’s investigation looked at 565 voyages from 80 different ships, 20 from each of Europe’s four largest shipping companies: Maersk, MSC, CMA CGM and Hapag-Lloyd. The most obvious case is that of Maersk: in a single voyage from China to Germany, the company will earn around 325,000 euros in extra profits, all deriving from the surcharge attributed to the entry into force of the ETS. For MSC, however, a trip from Europe to North America could yield €125,000 in extra profits. It is estimated that the average profits generated by this strategy are around 60,000 euros per trip for Maersk, followed by MSC with 25,000 euros, Hapag Lloyd with 23,000 euros and CMA CGM with 14,000 euros. Even if the profits generated for each trip are not ever so high, for companies with hundreds of ships this surcharge mechanism could be worth millions of euros in additional profits every year.
The impact of the ETS on the cost of goods. But does the ETS affect the cost of goods? Sea transport costs have only a marginal impact on the final costs of goods. This means that shipping companies can charge customers extra costs without causing too much fuss. As already shown in previous T&E studies, even the boldest climate measures would add only a few cents to the final price of most consumer goods, such as a bunch of bananas, a pair of sneakers or a television.
The ETS weighs on companies less than the disruptions in the Red Sea. Furthermore, the costs of the ETS are negligible when compared to the much higher surcharges charged due to the disruption to trade resulting from the attacks by Houthi militiamen in the Red Sea. In a case analyzed by T&E on the routes from Asia to Europe managed by the French transport giant CMA CGM, the surcharge attributable to the ETS is equal to less than 1% of the shipping price of a container, while that generated by conflicts in the Red Sea it represents almost 18% of the total cost of that same container.
Carlo Tritto concluded: “Economies of scale guarantee sea logistics the ability to easily absorb any turbulence in the costs of their activities. What occurred in the Red Sea is practically the worst possible scenario, but global trade was not affected. The financial weight of the ETS is small in comparison. The cost of CO2 credits is not an obstacle to decarbonizing shipping, since even the most ambitious environmental measures would add only cents to the cost of most consumer goods.”
Furthermore, in its analysis, T&E highlights how Maersk – the company that shows the worst performance according to the study – has outlined ambitious plans for the production of alternative green fuels. Last year, the Danish shipping giant launched the world’s first container ship powered by sustainable methanol and recently announced decarbonisation targets in line with science-based climate targets.
