KEF, Alm.del - 2020-21 - Bilag 219: Orientering om regeringens høringssvar til Europa-Kommissionens offentlige høringer om revision af hhv. EU’s kvotehandelsdirektiv (ETS), byrdefordelingsforordning, LULUCF-forordning og forordning om CO2-standarder for lette køretøjer

Klima-, Energi- og Forsyningsudvalget 2020-21
KEF Alm.del Bilag 219
Offentligt

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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KEF, Alm.del - 2020-21 - Bilag 219: Orientering om regeringens høringssvar til Europa-Kommissionens offentlige høringer om revision af hhv. EU’s kvotehandelsdirektiv (ETS), byrdefordelingsforordning, LULUCF-forordning og forordning om CO2-standarder for lette køretøjer

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

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

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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