News / UECC unveils 'much fairer' formula for calculating ETS liability

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Shipper concerns have been raised over the possible “inequitable distribution of EUA liabilities across the value chain”, under the new EU ETS rules, according to UECC energy and sustainability manager Daniel Gent. 

“A cargo owner has every right to expect to pay for emissions generated as a result of its cargo shipment, not more and not less”, he said.  

The EU Emissions Trading System will be phased-in for shipping on 1 January and will require shipping companies calling at European ports to purchase so-called EU Allowances (EUAs), or carbon credits, corresponding to each tonne of CO2 emitted, to cover their annual emissions. 

The price of fossil fuel emissions will then reflect the price, currently around €80 per EUA, this bill then distributed across the value chain. 

The issue, says Mr Gent, is that accurately and fairly distributing cost liabilities will require a reliable method of calculating the respective share of emissions among stakeholders, including ship managers, owners, charterers and cargo owners. 

He said: “Having to relate to shipping lines’ possible different formulae, for calculation of emissions costs, both increases the administrative burden and creates confusion for cargo owners. This can also result in higher costs for clients, due to overcharging and, consequently, inequitable distribution of EUA liabilities across the value chain.” 

He warned this could lead to a “ridiculous situation” where a cargo owner is liable for a Scope 3 footprint of 2,000 million tonnes of CO2 emissions, but is asked to pay for the equivalent of 3,000 mt because the EU ETS cost calculation is based on other external factors, such as higher T/C rates or bunker prices.  

His company, UECC, a ro-ro carrier operating on the European shortsea trades, yesterday announced the adoption of a new calculation formula for EUA distribution. It claimed its method was consistent with existing industry and international standards for carbon accounting in the logistics industry – the GLEC Framework and ISO 140832.  

The UECC formula calculates EUA costs for a cargo owner using its fleet average carbon intensity, the relative size of the cargo in cargo equivalent units (CEU) and the distance it is being transported. 

Carbon intensity is multiplied by CEU volume and distance between port of loading and port of discharge to determine tonnes of CO2 emitted. This is then multiplied by the average EUA auction clearing price on the European Energy Exchange in each reference period to give the final cost for the client. 

“We believe this is a credible method that could form the basis of a uniform EU ETS formula, which would be very much welcomed by the industry,” added Mr Gent.