News / Congestion fears as box lines plan to dodge EU carbon tax with UK first-call 

Port of Felixstowe © Phil Harland

The UK appears to have become the hot EU ETS-dodging destination du jour, with many carriers adding a call there before going on to EU ports on Asia-Europe routes. 

While the UK has its own emissions trading system (ETS), shipping will only be included from 2026 – and even then, only voyages that depart from and arrive at UK ports.

This means shipping lines that would be paying a 50% EU ETS levy on a voyage from Asia to Europe, had they called first at an EU port, would only need to pay the 50% on the hop from Britain to Europe. 

According to a May House of Commons committee report, the UK government does not intend to co-operate with the EU on matters of ETS, saying that even after 2026, “…rather than aligning immediately with the EU ETS, [the UK ETS authority] has decided to focus its efforts on supporting the work of the IMO in global reduction of greenhouse gas emissions from shipping”. 

The report acknowledged: “As matters stand the UK does not intend to subject international shipping to emissions trading measures similar to the EU ETS: operators wishing to ship goods to and from Europe can largely avoid the EU emissions trading scheme by using UK ports to ship goods to and from EU destinations. Failure to align the UK ETS with the EU ETS provisions for international shipping risks the promotion of carbon leakage.” 

Though it was widely predicted that Tangier Med, Suez, or ports in Turkey would become the tax-dodging capitals, it appears the UK has taken the lead. Recent research from Sea-Intelligence identifies that carriers are optimising Asia-Europe routes to make a first stop in the UK. In the case of Asia-Mediterranean routes, Egypt’s Damietta and Abu Quir ports are proving popular. 

OceanScore MD Albrecht Grell told The Loadstar there could be more congestion from 2025, as carriers adopt their new routes, prioritising a call at Felixstowe or Southampton before EU ports to avoid the EU ETS.

“We need to consider… that UK ports to my knowledge do not have the capacity to handle significant increases in throughput, so more port congestion, time lost, would have to be considered. 

“If we have a high share of feedered-out cargo on the vessel, the UK could make more sense, but this affects only a portion of overall trades,” he added. 

This week, DP World committed to a $1.3bn investment to expand operations at London Gateway, adding two new berths and a second rail terminal, turning the port into the largest in the UK by capacity within five years. 

Further downsides to the EU ETS-dodging approach, added Mr Grell, would include “longer overall voyages, more bunkers burned, more capital employed, more vessels needed in a loop… and the cost of a port call in the UK”. 

In all, OceanScore does not expect the loophole to last for long, he said.  

“The EU is monitoring evasive behaviour with a dedicated project. This will last until 2026 to adjust regulation in the following years. Extending transhipment ports would be part of this.

“So… I am somewhat sceptical that we will see this type of evasive behaviour at scale.”