18 April (Lloyd's List) - THE European Parliament has voted to include shipping in the bloc’s Emissions Trading System, according to a statement.

It will require companies to buy allowances for 100% of emissions for voyages within the European Union and the European Economic Area and 50% of emissions for voyages into or out of EU/EEA.

There will be a three-year phase-in period where companies will buy allowances for 40% of emissions in 2024, then gradually increasing to 75% in 2025 and 100% in 2026. Companies will pay for previous year’s reported emissions, meaning they will pay for 2024 emissions in 2025.

It will initially cover CO2 emissions, but methane and nitrous oxide will be included from 2026.

The inclusion of shipping in the carbon market is part of EU’s Fit for 55 package, which aims to cut greenhouse gas emissions by at least 55% by 2030 compared with 1990 levels. The parliament also decided to include offshore vessels above 5,000 gt in ETS from 2026. The text will have to be formally endorsed by the European Council before entering into force.

The ETS is estimated to cost shipping companies between €6bn ($6.6bn) and €7bn per annum once 100% of emissions are included from 2026, according to calculations made with current emissions levels and recent prices.

EU ETS allowance prices closed at €93 ($102) per tonne on April 17, according to Ice Exchange data.

The EU has decided to earmark 20m allowances from ETS for shipping specific projects as part of the Innovation Fund and the Climate Investment Fund. That total is estimated to be around €1.86bn with today’s prices.

The bloc has been concentrating efforts to tackle shipping emissions in recent years. It has agreed to set a 2% sub-quota for renewable hydrogen bunkering in 2034, which is the first such legislation for marine fuels in the world.