14 March 2024 AXSMarine
Maritime transport, often seen as a model of efficiency, is also a major contributor to greenhouse gas emissions. With over 1,076 million tons of CO2 emitted annually globally, accounting for 2.9% of the world's annual emissions, its impact is comparable to that of France, Spain, and Italy combined.
Why anticipate CO2 emissions for the years ahead?
As of January 1st, 2024, significant changes have been made to CO2 emission policies in the European Economic Area (EEA). The European Union (EU) has expanded its scope by integrating maritime transport into its Emissions Trading System (ETS). This measure affects all shipments including grains and oilseeds to and from EEA, requiring ETS CO2 credits to cover cargoes related emissions.
Grains and oilseeds, based on AXSMarine data, account for 25% of all CO2 emissions from Dry Bulk goods trades to and from EEA.
Calculating CO2 emissions for Grains and Oilseeds for EEA
Intra-EEA exchanges are assessed at 100% for ship emissions calculation, while exchanges between the EEA and other countries, meaning imports and exports, are only considered at 50%. This approach aims to allow partner countries the freedom to legislate on the remaining 50% of voyages.
Intra-EEA trade for Grains and Oilseeds accounts for 17% of the total, so only for those 17% of emissions, the EU is considering 100% of the emissions. For Trades from EEA (exports) and to EEA (imports), representing together 83% of the emissions, the EU will consider only half of the emissions on those segments. Notably, the ballast legs for picking the cargo in EEA are also taken in consideration.
The EU plans a gradual implementation of the scheme, considering 40% of emissions for the first year (2024), 70% for the second year (2025), and 100% for the third year (2026).
From CO2 emissions to impact on trading houses and cooperatives
In 2023, the average price of EU ETS credits was €85 per ton of CO2, while in February 2024, it was €53 per ton. With an expected variation in 2024, shipping companies will need to prove the purchase of ETS to cover 2024 emissions by summer 2025, some companies have already begun sourcing at the current low rate, while others will source later in 2024 or even in the first half of 2025, meaning that the cost estimation remains a forecast at this stage.
Financial impact on grains and oilseeds, assuming an average ETS credit price of €85 per ton in 2024 (average price of 2023):
The additional cost of exporting grains and oilseeds from EEA to partners countries in 2024, based on 2023 trades and voyages, would range between €37m and €59m, or an additional freight cost between €0.71 ($0.76) and €1.14 ($1.23) per ton.
For 2026, this would represent between €93m and €149m in additional costs for exports from EEA, translating to an additional freight cost between €1.78 ($1.92) and €2.86 ($3.10) per ton.
Impact on the future of EEA agriculture
On one hand, agricultural production costs may increase if inputs, such as fuels or fertilizers, are subject to emission quotas, potentially reducing farmers' profit margins. On the other hand, transportation costs for agricultural products may also rise as maritime shipping companies must purchase emission credits to offset their CO2 emissions, resulting in higher freight rates.
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