Regional carbon taxes will see surcharges applied to cover costs

Box lines have already said they will pass on the cost of environmental regulation to their customers. Now the extent of those costs is becoming clearer.

MSC, THE WORLD’S LARGEST CARRIER, EARLIER THIS MONTH SAID IT WOULD PASS ON ALL EUROPEAN CARBON TAXES TO ITS CUSTOMERS. Source: Hasenpusch Photo

SHIPPERS should prepare for a collective $14bn in costs as container lines pass through the cost of decarbonisation and new environmental regulations, according to analysts at Drewry.

As well as the Internation Maritime Organization’s target to reduce greenhouse gas emissions by 50% from the 2008 baseline by 2050, carriers faced pressure from regional and national regulations that would raise costs, as would the technological changes in the design and propulsion of ships.

“Overall, the transition towards low or even zero-carbon shipping will result in higher costs and we believe that we have put together the first independent cost model to help shippers forecast and quantify additional medium-term direct costs, where they apply,” said Drewry managing director Philip Damas.

Drewry pointed to the European Union’s carbon taxes, which will be applied via the Emissions Trading System and which will penalise high-carbon fuels.

This would push carriers towards using greener fuels that had their own cost implications and which would be passed down to customers in the form of surcharges.

Drewry’s analysis suggest the cost of both the European carbon taxes and for transitioning all European container shipments to a greener fuel types would range between $3.5bn and $14.5bn, depending on the level to which carriers moved to LNG and other lower carbon fuels.

MSC, the world’s largest carrier, earlier this month said it would pass on all European carbon taxes to its customers.

“Should the EU fully implement its plans, we anticipate higher operating costs to be compliant,” MSC said in a statement. “We therefore plan to pass on the cost of compliance, as we have done with other forms of environmental regulatory costs in the past.”

Based on a futures price of €90 ($90) per tonne, MSC estimated that the additional costs equated to €167 per teu for containers shipped from northwest Europe to Greece or Türkiye in the Mediterranean and €69 per tonne on the Asia-to-Europe route, the company said.

Maersk has also announced plans to introduce surcharges of €170 per feu for its Asia to northern Europe services and €185 per feu for northern Europe to US services to pass on extra regulatory costs.

Using a 2022 baseline cost of $187 per teu for very low sulphur fuel oil, Drewry calculates that by 2024 this would rise by $50 per teu for VLSFO and by $234 per teu for liquefied natural gas, or in sector-wide terms, between $3.5bn and $14.5bn.

“LNG is the main intermediate fuel type on the journey to decarbonise container shipping,” Drewry said. “Technology and fuel supply infrastructure are currently not ready for either green methanol or green ammonia. Future LNG prices will be heavily dependent on the ultimate future energy market.”