The European Union Emissions Trading System, better known as the EU ETS, is the EU’s market mechanism that applies a price to CO2 and creates incentives to reduce emissions. Established in 2005, the goal has been to reduce emissions in energy-intensive industries and from 2024, it will include emissions from shipping.

Under the scheme, all cargo vessels and passenger ships over 5,000 DWT sailing to or from EU ports, will have to surrender their emissions allowance as follows:

• 40% of their verified emissions in 2024

• 70% of their verified emissions in 2025

• 100% of verified emissions from 2026 onwards

This will include 100% of the emissions from intra-European routes and from vessels berthing within the EU, as well as 50% of extra-European routes to and from a port within the EU.

With the clock ticking, questions still linger over preparations, how the costs will be allocated, and how much the scheme will incentivize the industry. To answer these questions, Jean Sissener quizzes decarbonization guru Ingrid Kylstad of ZeroLab, with Kylstad then switching roles to probe Sissener on what steps KCC has taken for their own preparations.

Discussion points include:

• What is the EU ETS and the background for shipping to be included.

• How the mechanics of surrendering emissions allowances will work.

• The current (and possible) cost of the EU ETS, and how customers may prefer to deal with it

• KCC’s ongoing preparations.

• How KCC is ‘self-regulating’ with a carbon shadow pricing mechanism to its decision-making, and how its carbon adjusted freight (CAF) mechanism established with South32 works.