It’s Friday, December 2, and the European Union is going to regulate shipping emissions.

Map showing the planned expansion of London's Ultra Low Emission Zone

In a historic first, European legislators have agreed to regulate emissions from the shipping industry as part of the European Union’s emission trading system, one of the world’s largest carbon markets.

Under the trading system, first launched in 2005, companies from a number of energy-intensive sectors like power generation and steel manufacturing are required to buy permits for the CO2 they emit, creating an incentive to decarbonize.

However, the system has so far excluded emissions from the shipping industry, which uses hulking container ships to ferry more than 90 percent of all globally traded goods from port to port. The industry pollutes a lot, accounting for about 3 percent of annual greenhouse gas emissions. With the new agreement, which has not yet been finalized, EU regulators say they’ll require shipping companies that dock in European ports to buy carbon credits to cover 40 percent of their CO2 emissions, starting in 2024. They intend to increase that share to 70 percent in 2025 and 100 percent in 2026.

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Aoife O’Leary, CEO of the U.K.-based nonprofit Opportunity Green, told me the agreement represents an “important and vital step” to get the shipping industry to pay for its climate pollution. By making it more expensive to run ships on heavy fuel oils, diesel, or liquefied natural gas, she said the emissions trading system could expedite innovation and improve the business case for zero-emissions technologies — like ships powered by green hydrogen — that are in the works but not yet viable on a commercial scale.

In the meantime, O’Leary said there are a number of ways ships could reduce emissions right now, including by reducing travel speeds and plugging into the electric grid while docked, rather than continuing to burn fuel.

The International Maritime Organization, a U.N. agency that can set legally binding regulations for the shipping industry, could also drive decarbonization by increasing the ambition of its current, nonbinding climate target, which is to cut the sector’s emissions in half by 2050, relative to a 2008 baseline. O’Leary said she hopes the EU agreement will pressure the organization to require the industry to make even deeper cuts.

“I’m hoping it’s going to be a moment for inspiration for regulators around the world,” she said.

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