The cost impacts of Fit for 55 on shipping and their implications for Swedish freight transport

This paper analyzes the European Commission's (EC) climate policy package 'Fit for 55 ' and its potential impact on cargo ships calling at Swedish ports. Three scenarios are evaluated using the Swedish national freight transport model. The Main Scenario is based on the EC's proposal to i) include ships weighing at least 5,000 gross tons (GT) in the European Emissions Trading System (EU ETS), and to ii) introduce a tax on marine fuel. The Low Scenario includes the EC's EU ETS proposal but assumes no tax on marine fuel, whilst the High Scenario includes the fuel tax but assumes that ships weighing at least 400 GT are included in the EU ETS. Results show that the EC's EU ETS proposal excludes 44% of the cargo ships and 22% of the CO2 emissions, and even more so given the use of smaller ships to avoid the EU ETS, as indicated by the freight transport model. The High Scenario implies shifts to larger ships since the increase in fuel costs provides incentives to make use economies of scale. Shifts to other transport modes are estimated to be marginal. A policy conclusion is therefore to include smaller ships than 5,000 GT in the EU ETS to further internalize the CO2 costs from cargo ships.