17 March 2023


Drewry’s Managing Director Philippe Damas published an article on LinkedIn analysing the expected costs of EU environmental regulations to decarbonise shipping, namely the inclusion of maritime emissions into the EU ETS, the FuelEU Maritime Regulation, and the revision of the Energy Taxation Directive.

As it stands - the EU ETS approval by the Parliament and the Council is pending and the FuelEU Maritime and ETD have not been agreed by the institutions yet – Drewry estimates that on the major Asia-North Europe route, these combined policy measures will increase bunker costs and emission-related taxes or allowances from $312 per 40ft container for Very Low Sulphur Fuel Oil (VLSFO) today to $568/40ft using VLSFO or about $458/40ft using methanol, a low-carbon fuel. These represent estimated increases in bunker costs of at least 47% on this route for ocean carriers and – over time – for exporters and importers. Importantly, they are also expected to give methanol-powered ships, by 2026, a cost advantage of $110 per 40ft over vessels powered by conventional, more polluting fuels, when sailing to and from Europe.

New environmental regulatory and tax changes also have contractual implications for shippers: Philippe Damas reported that many customers are being asked by ocean carriers to add a clause in their contracts providing that carriers will be allowed to pass on the cost of new EU regulations to the shipper/customer. However, it is still very difficult to estimate the exact costs of the new environmental regulations: as noted by the ITF in its report on carbon pricing in shipping, as this would largely depend on market conditions and bunker fuel price over time. Effective capacity could be affected either by slow steaming (increasing transit times) or by shorter routes (decreasing transit times), while a very low demand for ocean freight might deter ocean carriers form passing on certain extra costs.