We understand that CO2 emissions might not be at the forefront of your logistics priorities. However, shipping costs will eventually be impacted by the European Union's plan to curb emissions, so your company may want to start to track its Co2 footprint.
The European Union announced their new plan to eliminate greenhouse gas emissions by 55-60% by the end of the decade earlier this month (The New York Times). Some ideas being introduced include electric car batteries, offshore air production, or hydrogen-powered aircraft engines. Even though this would make Europe a leader in new, cleaner technologies, it will affect almost every industry in the trade block leaving them with catastrophic consequences in employment and their economy:
“The proposals could reshape ‘contaminated’ industries such as steelmaking, which employs 330,000 people directly in the European Union” -Nation World News
The agreement demands companies that use fossil fuels to pay more for the number of emissions they generate to encourage their efforts in clean energy, but modes of transportation ( air, ocean, truck) will have a tough time fully transitioning. Airplanes are a major producer of carbon dioxide emissions but are difficult to convert to an emission-free operation. According to the commission’s proposal, airlines will be forced to mix synthetic fuels with their used fossil fuels and will no longer receive tax exemptions on fossil fuels. Most ships that sail in the oceans run on low-grade oil which is a major pollutant, but the shipping industry lobbyists have already pointed out that it is not clear how the plan will be implemented and which shipping routes will be affected.
“Is it just going to be a European country, or half the trade between China and the EU?” - S&P Global Platforms
Another big issue affecting companies, especially in the aviation and maritime industry, will be the revision of the Energy Taxation Directive on electricity, motor and aviation fuels, and most heating fuels. First, the proposal introduces a new structure of tax rates based on the energy content and environmental performance of the fuels and electricity. Secondly, it will alter the way in which energy products are taxed in the EU and remove outdated exemptions and incentives for the use of fossil fuels, for example, the EU aviation and maritime transport who are currently exempt from this tax. The proposal groups energy products and electricity in general categories per type, which are ranked according to energy content and environmental performance. In this way, the new system will ensure that the most polluting fuels are taxed the highest (click here for the plan’s breakdown).
“France’s Timmermans, the European commissioner in charge of the so-called Green Deal, acknowledged on Wednesday that “some sectors will benefit more than others.” He said the European Commission had a responsibility to show that balances and rewards could be fairly allocated” - Nation World News
Some additional effects we will see is the elimination of cars with internal combustion engines from showrooms by 2035, steel producers and cement manufacturers will pay for every ton of Co2 emitted by their factories, and modes of transport such as cargo ship and airplanes will need to replenish with synthetic fuels produced by green energy. One issue mentioned is that cargo ships may not be able to run cleaner fuel in ports such as Rotterdam or Hamburg. Ultimately, if companies that produce obsolete products do not adapt, they will be out of business. Not only is the reality of converting to greener fuels a cause for concern, but the increased prices for both the company AND consumer would inevitably lead to a global rise in overall costs of a wide variety of goods and services.
“We’re going to face increased carbon costs – this is going to be the end result,” said Koen Koppenhole, Chief Executive of the cement industry trade group Simburi. - S&P Global
So, what does this look like for the consumer? Expect to see that vacation flight to Greece or even that full tank of gas skyrocket in price.
“It’s a fact that needs to be told...One way or another, as consumers we will have to pay the price for green change.”
-Akio Ito(Senior Partner at Roland Burger-Munich-based consulting firm) to Money Control
For more information and to view a breakdown of the EU’s plan, click here.