Shipping chief warns EU carbon schemes threaten to raise industry emissions

The head of the world’s second largest container carrier has warned that European Union plans to cut carbon emissions threaten to increase the carbon dioxide produced by the shipping industry.

Soren Toft, CEO of Mediterranean Shipping Company, told the Financial Times that the EU’s actions, which are still being considered, would have the opposite effect on its intentions unless low-carbon fuels are readily available.

This is because operators will have to slow their ships to meet the demand for the cuts, creating the need for more new ships to maintain service levels.

“For us, it’s very clear that what they’re proposing in the absence of carbon-neutral fuels is going to add more capacity, more containers, all of which need financing, build in Asia, which will produce more emissions,” he said.

However, Tristan Smith of the UCL Institute of Energy said the notion that EU carbon measures would increase industry emissions was “unreliable”.

He added that ships’ emissions from burning ship fuel are much higher than those produced in construction, and other economic factors such as oil prices and freight rates determine the ship’s speed.

The comments by MSC, which is set to overtake Maersk as the world’s largest container group by capacity with the largest order book for new ships, comes at a critical juncture as the European Union prepares proposals to review its carbon market next month.

It’s also significant that Tofte, who joined MSC from Maersk in December, has spoken, as the group has rarely courted publicity since its founding in 1970 by Gianluigi Aponte.

Soren Toft joins MSC as CEO as the industry faces scrutiny over its response to climate change and efforts to restore service reliability © Oliver O’Hanlon / MSC

The big question for the shipping industry is the range of flights the European Union will target in its revised emissions trading system as policymakers attempt to cut carbon dioxide emissions by 55 per cent by 2030.

Shipping, which produces 2.4 percent of global carbon dioxide emissions, is difficult to decarbonize because low-carbon fuels such as green ammonia or hydrogen are not widely available.

Diederik Samsom, the European Commission official who heads the team responsible for the EU Green Deal, said the emissions trading system would be the main mechanism used to help reduce carbon dioxide in the shipping sector.

Carbon pricing, which allows emitters to buy permits to meet CO2 targets, would provide a “real incentive” [maritime] Samsom told the FT’s Future of Europe conference last week.

He added that the industry can keep pace with the new commitments by using different types of ships and different sailing speeds to reduce carbon emissions.

Graph showing cargo capacity, current fleet vs order book

Toft joined MSC with the industry facing increasing scrutiny on two fronts: its response to climate change and efforts to restore service reliability, which have collapsed during the pandemic.

MSC ships lost 10,000 sailing days this year from waiting in crowded ports, up about a third from last year.

“We strive to provide the service we believe our customers deserve,” said Toft.

But he insisted that the current disruptions in the global supply chain, which he believes will likely continue into the next year, are “not caused by carriers”.

Another concern for the industry is the potential for a patchwork of regional emissions taxes. “The EU will take that approach and then before we know it, we will have 10 different ways to deal with it,” Toft said.

But some smaller operators such as Torvald Klaveness and Maersk Tankers say the industry must accept that the EU will legislate on shipping emissions and work to influence the regional initiative rather than prevent it.

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