Finland influences shipping emissions trading

The European Commission intends to make a proposal on extending emissions trading to maritime transport in the summer of 2021.

Maritime transport plays a crucial role in Finnish foreign trade due to Finland's geographical location. It is expected that the Commission will issue the proposal on 30 June 2021, at the earliest.

"In addition to the International Maritime Organisation's (IMO) measures, we need EU level actions in order to achieve the emission reduction targets. At the same time, we must ensure that Finland's special circumstances are taken into account to guarantee that our relative competitive position is not weakened when compared to other countries," says Minister of Transport and Communications Timo Harakka.

It has been agreed that the EU's emission reduction target for 2030 will be tightened from 40% to at least 55%.

Finland continues to influence the preparation of missions trading for maritime transport so that the Commission's proposal would reduce emissions efficiently. At the same time, it is important to pay attention to Finland's relative competitiveness, as foreign trade is dependent on maritime transport. Finland deems it important that winter navigation is considered in emissions trading. The Commission's proposal has been influenced especially in terms of winter navigation so that winter navigation would not cause additional emissions trading costs to Finnish foreign trade.

Ice-strengthened vessels inevitably consume more fuel than other vessels and, therefore, produce more emissions. Due to the structures of ice-strengthened vessels, they also cause more emissions in open waters. In addition, navigating in ice requires more power.

In emissions trading, the parties must annually obtain and surrender emission allowances equivalent to their emissions. Emission allowances can also be bought and sold. By gradually reducing the total number of issued emission allowances, operators are guided to reduce their emissions.

The impacts of emissions trading depend on the choices made on the design of the emissions trading system. It is not yet known what kind of emissions trading system the Commission will propose for shipping. One significant decision will be the definition of the geographical area which the emissions trading system will cover. The alternatives are: 1) emissions trading only covering the routes between ports located in the EU, 2) emissions trading also covering routes between the EU ports and the ports in third countries or 3) a combination of the two.

Other decisions, which play a crucial role in emission trading effectiveness and competitiveness impacts, are the size limits of vessels covered by emissions trading, the selection between a separate emissions trading scheme for maritime transport or the integration of maritime transport into the existing emissions trading scheme and the issuing method of emission allowances. Emission allowances can be distributed through an auction, for free or partly through an auction and partly for free. It is also defined how much and at what pace overall emissions in the EU must be reduced. It must also be decided how to use the emissions trading auctioning revenue.

The Ministerial Committee on European Union Affairs outlined Finland's advance lobbying opportunities in a written procedure on 30 April-3 May 2021.

What next?

The Commission intends to make a proposal on shipping emissions trading as part of the extensive Fit for 55 climate package which aims to ensure that the EU will reach its increased emission reduction goal for 2030. The package will include several emission reduction proposals concerning transport. It is expected that the proposals will be submitted in June-July, at the earliest.

For more information, please contact:

Minister of Transport and Communications Timo Harakka, ministerial interview requests to Communications Director Susanna Niinivaara, tel. +358 40 081 6187

Senior Specialist Niina Honkasalo, tel. +358 50 302 8123, niina.honkasalo(at)lvm.fi, Twitter @HonkasaloNiina

Director of Unit Päivi Antikainen, tel. +358 50 382 7101, paivi.antikainen(at)lvm.fi, Twitter @PaiviAntikainen