Stena Line explains possible impact of ETS on ferry services and pricing

Stena Line explains possible impact of ETS on ferry services and pricing — 2023-07-17

Maritime and Ports

Last month, European ferry operator Stena Line published an article on its website that detailed why a surcharge would have to be introduced to mitigate the cost of the EU's expanded Emissions Trading Scheme (ETS). A representative of the company has since told trans.iNFO that investment in biofuel and electrification will be the best way for ferry operators to deal with the new rules.

Changes to the European Union’s Emissions Trading Scheme (ETS) will increase ferry operators’ overheads, the knock-on effect of which will likely mean higher freight costs.

The revisions are part of the EU’s ‘Fit for 55′ package, which aims to achieve a 55 % reduction in EU net greenhouse gas (GHG) emissions by 2030, compared to 1990 levels.

As explained by Alex McDonald of Freightlink, the ETS scheme requires ferry operators to buy allowances for their carbon emissions. In 2024, operators must buy allowances for 40% of their emissions. The figure rises significantly to 70% in 2025 and then to 100% they year after that.

Freightlink’s Managing Director says that the changes “will result in an increase in costs for ferry operators, who will pass this cost on to customers”. Those customers include both car passengers and logistics companies.

Stena Line are among the ferry operators who have declared they will be implementing a surcharge. The company says that ETS will have a significant impact on the cost base for the industry, and adds that the increased cost will need to be absorbed by the market.

With shipping in ETS starting next year, we will introduce a surcharge towards all customers in January 2024. This surcharge will be specified towards customers for best transparency. As the launch of ETS approaches, more details will become available from the EU and we will gradually inform customers regarding the anticipated effects,” writes Stena Line on its website.

To address the issue, Stena Line is taking a two-stage approach. Initially, biofuel and efficiency measures will be utilised, with electrification coming into play further down the line:

The first step in decarbonizing our vessel fleet will rely on improved energy efficiency measures and biodiesel. This will continue together with the uptake of sustainable methanol for converted vessels. The long-term perspective will be governed by battery electrification with a share of cost-competitive sustainable liquid fuel at routes more challenging to electrify,” says Stena Line.

Given that Stena Line has already been proactive with its procurement of biofuel, could they be less impacted by ETS and thus offer more competitive rates?

In reply to this question, Stefan Elfström PR & Communications Manager (for Sweden, Germany, Denmark, North Sea, Baltic Sea North and Baltic Sea South), simply told trans.iNFO “No is the short answer”.

He added: “We cannot know for sure how the design of the ETS will develop over time with regards to penalties and what they are based on – this is for the EU to decide. However, we believe that investing in a shift to biofuels and electrification is the best route to choose for us in order to put us in the best possible position in the future as we aim to be a leader in sustainable shipping.”

Regarding what factors will influence the price of ETS surcharges on ferry routes, Elfström listed the length of the journey, the fuel used, capacity utilisation and the freight/travel mix as factors.

We also quizzed Elfström on whether the additional costs passed on to hauliers via ETS could encourage more companies to take shorter crossings (e.g using the short straits routes to go to the North of England or Scotland from mainland Europe, as opposed to longer Netherlands-UK sailings).

In response, Elfström said: “This depends on the total business case for our customers, where ETS or its equivalent for road transports needs to be taken into consideration, and also how the customer and its customers in turn value sustainability and fossil-free transports.”

As for the electrification of its fleet, Stena Line is currently working with Stena Teknik on the development of the Stena Elektra. The aim is to make it possible to launch the fully electric ferry by 2030.

When asked if there were any ports the vessel could likely make its debut, Elfström did not name any location in particular. He did nonetheless tell trans.iNFO that the ferry would most likely operate on a short route. A prerequisite, of course, is also for the infrastructure to be in place:

“Stena Elektra is a concept for how a battery-electric ferry could look like, and we have said that we could have this on the market in 2030. However this requires the charging infrastructure to be in place first (on both sides of any given route), and this is not the case today. This is why we are talking to governments, cities and ports to understand if they have these ambitions, but the most likely routes would be the shorter ones. An alternative would of course be hybrid ferries with a combination of electric and methanol propulsion for example,” said Elfström.