Impacts of the inclusion of the maritime sector in the EU ETS. A transshipment hub relocation case study.

The paper investigates the impacts of the inclusion of the maritime sector in the EU Emissions Trading System (ETS) and examines the arising risk of carbon leakage as a result of regulating international sectors with regional rules. We focus on container vessels engaging in flow reconfiguration and proceeding in transshipment hub relocation under the prospects of evading the EU ETS. We perform a cost-benefit analysis to evaluate the EU Allowances (EUAs) cost reduction potential of replacing an EEA transshipment hub with a non-EEA competitor. Our case study examines the Algeciras-Tanger Med scenario and identifies the EU carbon price that renders the practice of hub relocation cost-effective. Prior experience during COVID-19 illustrates that shipping lines have the flexibility to rearrange their routes and services as a response to unprecedented market conditions and thus affect cumulative global and EU GHG emissions and allowances prices. With COVID-19 impacts on supply chain disruptions and congestions on transshipment hubs, the implementation of the EU ETS may further harm the EU supply chain and lead to revenue loss. Results of this study show that the hub switch amplifies the risk of carbon leakage and threatens the economic development and activity of the EEA ports.