The freight industry is changing.

From 2024, the EU will begin implementing their Emissions Trading System (ETS) for shipping. We recently asked our MD Alex McDonald to answer a few questions about the ETS and what businesses should expect. Read the full interview here.

Promoting the decarbonisation of industry, the ETS has incentivised countless businesses to reduce their overall emissions since its initial phase began in 2005. 

Now, 18 years later, we are entering into the System’s fourth phase. As the European Commission’s ‘Fit for 55’ package comes into play, the shipping industry will also be subject to the Emissions Trading System and its rules from January 1st 2024. Shipping companies will incur a ‘carbon tax’ on their CO2 emissions.

But this isn’t the only change we can expect to see in the coming years. 

Later this year, drivers travelling to the EU may need to provide further information at the ports, including ‘biometric data’ (such as fingerprints).

Meanwhile, the pressure on drivers to ensure maximum vehicle security has increased tenfold, and responsible parties may be charged as much as £6,000 each for their unsecure vehicle where no clandestine entrants were found. 

With mounting pressures on drivers and transport businesses, the ETS brings further challenges. But these challenges were not unforeseen. In fact, for many European ferry operators, committing to sustainability is nothing new. 

Alternative fuels

A new day, an old problem. 

Reducing the negative impact for ferry transport has always been a concern. Since 1973, the International Maritime Organisation (IMO) has been designating different sea regions / zones as “special areas”, with each one being subject to environmental protocols such as Annex I Prevention of pollution by oil, Annex II Control of pollution by noxious liquid substances, etc.

At the same time, ferry operators have been implementing new strategies to reduce their environmental impact in accordance with IMO regulations, including Poland’s largest ferry operator, Polferries. As part of their efforts to reduce sulphur dioxide emissions in the Baltic Sea (which first adopted Annex VI: Prevention of air pollution by ships in 1997) Polferries use low-sulphur emitting fuels for their vessels.

In 2020, the Irish Sea joined the Baltic Sea and North Sea in adopting Annex VI, creating a new SECA zone (Sulphur Emissions Control Area) with new regulations for Irish Sea vessels. This meant that Irish Sea operators would be charged for crossing a certain threshold of sulphur emissions. This cost was picked up by customers who had to pay the Low Sulphur Surcharge (LSS) on crossings.

Other operators have also put reducing emissions at the forefront of their goals. Scandlines have ordered a ‘zero emission’ ferry to operate on the Puttgarden-Rødby route from 2024, while TT-Line’s new Green Ships rely on sulphur-free and low-CO2-emitting Liquefied Natural Gas (LNG) as an energy source, which is also the cleanest fuel currently available for ferries. By 2030, we could also be seeing one of the first emission-free hydrogen-powered vessels, the Gotland Horizon, begin operations.

But it takes work for alternative fuels to become commercially viable. 

Making Alternative Fuels Feasible

DFDS have made significant investments, such as helping to fund a 1.3 gigawatt e-fuel and hydrogen production facility, with the goal of making sustainable fuels a feasible energy source - not just for maritime transport, but also for air and road.

Meanwhile, some environmentally-focused parties are looking into creating ferries that rely on the elements, rather than alternative fuels. Earlier this year, Wallenius Wilhelmsen and partners secured funding of 9m EUR for the Orcelle Wind - the world’s first RoRo vessel powered by wind. In just five years’ time, the Orcelle Wind is projected to be not only completed, but also fully operational. 

Big problem, innovative solutions

Improving the environmental impact of ferries has been a focus of ferry operators for decades now. But with the coming ETS ‘carbon tax’, ferry operators will need to put their efforts towards more creative solutions that go beyond alternative fuel sources.

One ferry operator using closed loop scrubbers (cleaning devices that decrease sulphur in exhaust gases), Stena Line, sends the scrubber residue / waste product to be reused for other purposes, such as in pencil factories. This decreases the number of sulphur emissions and the effect on marine wildlife.

Meanwhile, Irish Ferries use an oil recovery system to recycle all waste oil from their fleet. The Irish ferry operator also reduces the negative impact on sealife by minimising wave generation and painting the hulls of their ships with tin-free and non-toxic paints.

And with their new super-ferries, P&O ferries are able to reduce fuel consumption by fitting their new vessels with azimuth thrusters to allow for better manoeuvring, two bridges, a heat recovery system and more.

Not only are operators creating innovative solutions to reduce their carbon/environmental footprint, but some are beginning to share this information publicly with customers. 

For example, Stena Line now has a carbon emissions calculator so that businesses can easily keep track of their own carbon footprint whilst transporting goods, while Eurotunnel’s customers can learn how much CO2 they saved by transporting with them.

But do the CO2 emissions of a ferry/tunnel operator influence customer (trader) purchasing decisions, or is this simply a mandatory checkbox for operators?

Looking to the future

Despite the industry’s reputation, shipping companies are making the changes needed to reduce their environmental impact.

So, how do GB & EU businesses really feel about the future of freight? 

We asked 53 businesses (including transporters, hauliers and couriers) across Great Britain and the EU to share their thoughts about the transport sector and sustainability. 

Here’s what we found.

• Across the board, 7 in 10 participants said they were looking forward to the freight industry becoming more eco-friendly.
• Meanwhile, almost 3 in 10 remarked that they "hadn't really thought about it".
• Over two thirds said that their business had actively begun to lower their environmental impact - for example, by improving their packaging, modernising their fleet and choosing greener energy sources.

Then, we asked these same businesses whether a freight ferry operator's commitment to sustainability would impact their ticket purchasing decisions. 

• 66% of participants said that the environmental impact of a ferry/ferry operator would impact their purchasing decision.
• However, 1 in 5 participants who said "yes" went on to add that the ferry operator's environmental impact would only affect their purchasing decision if there wasn't a significant price difference.

There was no discernable difference in attitudes to the future of freight between GB and EU countries. This shows that while the industry is generally looking forward to a ‘greener’ future, the number one consideration when arranging ferry or tunnel transport for their goods is price.

This is perhaps unsurprising, especially given how challenging the last few years have been for so many businesses. Now, with the addition of the EU ETS for shipping, ferry operators and shipping companies will need to ensure that any further advancements made will be sufficient to support their business through the next few years.

Find out more about the EU ETS

The Future of Freight

In the coming years, shipowners who fail to reduce their CO2 emissions in line with the EU ETS may suffer large fines/penalties, or could even have their ships detained.

We can expect to see further innovations in the coming years to meet the demands of the EU Emissions Trading System. However, the number one consideration going forward is likely to be price. 

As shown in our survey results, businesses in the freight industry are looking forward to a greener future with greener ferries. However, price, as one participant remarked, "is king", and will remain the number one consideration moving forward. Sustainable innovations made moving forward must also prioritise profits in order to protect the freight industry in the future. 

While the logistics industry evolves to meet the demands of the ETS, we will as always keep you updated with the latest industry news. 

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(Header image depicts one of Stena Line's newest sustainable ferries, the Stena Ebba.)