By Lizzi Williamson
For most of modern shipping history, a port’s appeal has been easy to understand. Location, water depth, cargo-handling speed, inland connections and port charges determined how attractive a call would be. A shipping line choosing between calling at Rotterdam, Hamburg or Antwerp would mainly ask which port could move cargo fastest and connect it most cheaply to customers inland.
Now there is another item on the bill: carbon.
The European Union is turning greenhouse-gas emissions into a direct business cost. For shipping, carbon is becoming another factor in commercial decision-making: where ships call, where they refuel and how long they spend in port can all dictate the final bill. In some cases, these rules are quietly redrawing the map of European trade, as shipping lines reroute around EU borders to avoid the price tag entirely.
Two measures sit at the centre of the change: the EU Emissions Trading System (ETS), and FuelEU Maritime. Alongside new requirements for shore-side electricity and alternative-fuel infrastructure, they are altering the economics of port competition. The result could be a new hierarchy, where carbon efficiency becomes as important as cargo-handling speed, connectivity and cost.
Putting a price on pollution
Shipping entered the EU ETS in 2024. The idea is straightforward: shipping companies must account for greenhouse gases their vessels produce and surrender carbon allowances to cover them. Those allowances have a market price, so pollution stops being just an environmental cost and becomes a financial one.
The rules apply mainly to commercial ships of 5,000 gross tonnes and above calling at EU ports, regardless of flag. Emissions from voyages between two EU ports are fully covered, as are emissions produced while ships are in EU ports; voyages to or from a non-EU port are roughly half covered. The scheme has also been phasing in gradually since 2024, reaching 100 per cent of emissions produced in 2026.
That challenges the value of efficiency. Burning less fuel now saves money twice over: once on bunkers and again on the allowances a ship no longer needs to buy. It also lands unevenly across the fleet, since an older, less efficient vessel burns more to cover the same distance and so it owes more allowances too. Ship age is no longer just an efficiency question; it is now a carbon cost one too.
FuelEU Maritime, which took effect in 2025, works differently. Instead of pricing emissions directly, it progressively reduces the permitted greenhouse-gas intensity of the energy ships use, tightening year on year until it reaches an 80 per cent cut by 2050. Crucially, it looks beyond the ship’s funnel: its “well-to-wake” approach accounts for emissions generated in producing and supplying fuel, not just those released when it’s burned on board.
That makes fuel choice matter in a way it never used to. Conventional fuel oil will likely remain viable for years, but lower-carbon alternatives are becoming steadily more valuable, because they can reduce a shipowner’s compliance burden before a single allowance is bought. In the near future that mostly means biofuels, as genuinely new fuels such as green ammonia and methanol aren’t produced yet at the scale shipping would need.
Why ports suddenly matter more
At first sight, ETS and FuelEU are shipping regulations. In practice, much of their economic weight lands on ports. Take two ports serving roughly the same market: extra sailing distance now brings not just higher operating costs but a larger carbon bill too. Congestion creates a similar penalty, since a vessel waiting outside a crowded port, or idling at berth with its auxiliary engines running, burns fuel it didn’t need to and now must pay a carbon price for the privilege.
Efficiency therefore becomes a competitive advantage. A port offering predictable berthing and fast cargo handling can be more attractive than a cheaper alternative if it reduces time in port. Carbon regulation, in other words, has put a price tag on good port management.
Ports as power stations: shore-side electricity
The most visible change may be shore-side electricity. Ships still need substantial power while berthed for refrigeration, pumps, lighting, ventilation and cargo equipment, but this has traditionally been produced by auxiliary engines burning fuel in port. The EU wants that practice phased out: from 2030, major container and passenger ports will need to provide substantial shore-power capacity, with qualifying ships required to switch off their engines and plug into the grid instead.
Supplying a containership or cruise ship is not like installing a charger for an electric car; it requires new grid connections, transformers and cabling, making shore power a major investment for ports. It also means a port is no longer just a landlord with berths and cranes; it has to act as an energy provider too.
That obligation also creates an opportunity. Shipping’s transition needs places to produce, store and supply lower-carbon fuels, and ports already possess much of the infrastructure, including storage, pipelines and established industrial connections, needed to support them. For larger ports, the investment can be spread across a high volume of vessel calls, while smaller ports may struggle to achieve the same economies of scale.
Dodging the carbon bill
There is, however, a risk the EU is actively trying to manage. If calling at an EU port becomes significantly more expensive, shipping lines have an obvious incentive to see whether some operations can be shifted outside the Union. Container transhipment shows how, in practice, that could happen. The ETS charges only half the emissions on a voyage into the EU from outside it, but the full amount between two EU ports. This gap is what created the loophole: a ship could in principle stop briefly at a non-EU port just outside Europe and count only the short final leg at full cost. Alberto Rossi, secretary-general of the Italian shipowners’ association Assarmatori, has confirmed this is exactly what’s happening, with liners facing roughly €300,000 in ETS costs per call choosing to route via a nearby non-EU port to claim the discount.
The EU has built in anti-avoidance measures for precisely this reason, targeting companies who break up a long voyage through a nearby non-EU transhipment port purely to reduce ETS or FuelEU exposure. Tanger Med in Morocco and East Port Said in Egypt have both been specifically named as “evasive” ports within this radius.
The existence of these very rules says something important: policymakers already accept that carbon regulation can reshape the geography of trade. Mediterranean EU ports are no longer just competing with each other, but with ports across North Africa, Turkey and the Middle East. If the cost gap becomes large enough, cargo moves; which is exactly why the EU keeps having to redraw the boundary.
Who ultimately pays?
Shipping companies will, naturally, try to recover at least some of these new costs. In liner shipping, that may mean higher freight rates or explicit carbon surcharges. In chartered shipping, owners and charterers increasingly need contract clauses deciding who bears the cost of emission allowances and FuelEU compliance costs, giving rise to new “carbon clauses” in charterparties.
Wherever the cost starts, it rarely stays put. Kenneth Tveter, head of green transition at the shipbroker Clarksons, has put it plainly: decarbonising shipping will be inflationary for freight rates. Those higher rates can ultimately feed into the price of goods imported into Europe, passing the cost along the supply chain. The bill may begin with the shipowner, but it does not necessarily end there.
The bottom line – Does it actually work?
Supporters of the regulation make a simple case. Making pollution expensive gives shipowners a direct financial reason to cut emissions. It rewards efficient, modern vessels over older, wasteful ones. And it builds a genuine market for cleaner fuels, because burning anything else keeps getting more expensive by comparison.
Critics make an equally simple case. Some of the cost will ultimately be passed down to consumers, making the policy another cost on trade. Worse, some activity may not become greener at all, it may simply move outside EU jurisdiction, as the evasive-port loophole shows. Shipping lines could even end up choosing longer, less direct routes if doing so lowers their carbon bill, which seems like a strange outcome for a policy meant to cut emissions.
There is a harder question underneath both arguments: does putting a price on carbon actually change what ships do, or does the industry simply pay and carry on? The IMO’s Carbon Intensity Indicator offers one test. In a 2023 analysis based on large-scale AIS data, shipbroker and arbitrator Philip Bacon found no visible change in tanker and bulker speeds that could be attributed to CII. Instead, he argued, fleet speeds continued to track earnings and bunker costs.
That points to an answer. As a price signal, the policy clearly works: it’s already reshaping routes and contracts. As proof that ships change what they do day to day, the evidence is thinner. A price on carbon can shift boardroom decisions well before it shows up as a slower ship at sea.
The new rules of port competition
The deeper significance of these rules is that the EU is converting carbon from an external environmental cost into something that shows up on commercial balance sheets. Once emissions have a price, behaviour changes accordingly: ships have more reason to save fuel, shipping companies have more reason to cut waiting times, terminals have more reason to provide clean electricity, and energy companies have more reason to invest in new marine fuels.
Traditional port advantages will not disappear. Deep-water access, strategic location, fast gantry cranes and robust rail links will remain essential, but they are no longer sufficient on their own. Europe’s ports are entering a new phase of competition, in which their ability to provide ships with affordable electricity, shore power and low-carbon fuels will matter alongside the speed and efficiency of cargo handling. The ultimate winners will be those that meet these new energy demands without losing the strengths that made them competitive.
Historically, a port’s competitiveness came down to one question: how much does it cost to sail here? The EU has now permanently added a second: How much does it cost to emit? The real test is not whether it makes shipping pay for its emissions: it clearly does. It’s whether Europe can do this without quietly pricing its own ports out of the very trade they are trying to protect.
The views expressed in this article are the author’s own and may not reflect the opinions of The St Andrews Economist.
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