Carbon pricing: Will maritime emissions increase as ships avoid ports within a carbon trading scheme?

Greek researcher wins 2023 Young Researcher of the Year Award for exposing the risk of higher emissions if shipping operators switch to hubs outside EU Emissions Trading System zone

Ms Sotiria Lagouvardou, a recent PhD graduate of the Technical University of Denmark and now a Maritime Transport Specialist at the World Bank, receives the prestigious award from the International Transport Forum’s (ITF) Secretary-General Young Tae Kim during the ITF's 2023 Summit on “Transport Enabling Sustainable Economies” in Leipzig, Germany on 25 May 2023.

Her research reveals that shipping hubs outside the EU's Emissions Trading Scheme (EU ETS) become attractive at relatively low carbon prices. The study highlights that, without appropriately designed policies, hub switches could result in increased carbon emissions (or “carbon leakage”) and lost revenue for the EU ETS. In addition, such switches could threaten the economic activity and development of transhipment hubs close to hubs outside the scheme.

Ms Lagouvardou holds a PhD (Market-based Measures for Sustainable Shipping) and a Master of Science (Naval Architecture and Marine Engineering) from the National Technical University of Athens. In her doctoral analysis on the impact of the maritime sector’s inclusion in the EU ETS, she reveals that the preference for an alternative non-EU ETS port would become attractive for carbon prices well below 25 EUR per metric ton of CO₂. The research focuses on case studies of the Piraeus–Izmir and Algeciras–Tanger Med port scenarios.

The EU ETS is a cornerstone of the EU's policy to combat climate change. The scheme is the world’s first, most extensive and longest-running international system for trading emission allowances. The EU ETS covers around 40% of the EU's greenhouse gas emissions and will cover maritime transport emissions from 2024. The highest carbon price to date was EUR 100.34 per metric ton of CO₂ in February 2023. The average annual price of carbon permits in the EU has increased significantly since reforms to the EU ETS in 2018.

ITF Secretary-General Young Tae Kim said:

“Effective decarbonisation policies are crucial to meet our shared global climate goals. Sotiria Lagouvardou’s world-class paper demonstrates how research can help avoid the pitfalls that hinder sustainable economic development and that may even reverse the intended effect on emissions. By illustrating the EU carbon turning point that renders the relocation of a shipping hub cost-effective, this pragmatic case study allows policy makers to quantify the risk of evasion of the scheme. Ms Lagouvardou’s research aligns perfectly with this year's ITF Summit debate on shaping a sustainable global transport system that supports economic progress.”

Winner Sotiria Lagouvardou said:

 “I am sincerely grateful to ITF for awarding my research with this prestigious prize! Shipping is the backbone of international trade and right now is at the centre stage of the debate on sustainability. My research focused on the implications of carbon pricing policies on shipping and, particularly in this paper, on the arising risk of carbon leakage due to the inclusion of shipping in the EU ETS. We were delighted to see that following this paper’s publication, the European Parliament and Council introduced new clauses in the final directive that address and mitigate this specific risk. I believe that the link between research and policy making is imperative as research assists in shaping informed policy making and policies provide a framework for guiding and supporting scientific endeavours.”

The award-winning paper “Implications of the EU Emissions Trading System (ETS) on European container routes: A carbon leakage case study” by Sotiria Lagouvardou and Harilaos N. Psaraftis can be downloaded free at https://www.sciencedirect.com/science/article/pii/S2666822X22000107

Since 2008, the ITF Young Researcher Award honours young scientists under 35 years of age for research that supports sound transport policy-making. In 2023, the Award attracted applications from 38 transport researchers across 25 nationalities working in 15 different ITF member countries. The ITF Secretariat and a gender-diverse jury of seven experts from a mix of nations assessed the entries. The 2023 applications were of an extremely high standard and revealed great diversity between the papers. The panel carefully reviewed four shortlisted entries, from which they chose the winning paper. The Award carries a prize of EUR 5 000.

See photos from the Award ceremony

Watch video interview

More information at: https://www.itf-oecd.org/young-researcher-year-award-2023

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