The European Union's emissions trading system will expand next year to include the maritime sector, which means shipping companies will increasingly need to consider the environmental impact of their operations in their cost calculations. The more carbon a fuel emits into the air, the greater the cost to the company.

ERR has reported on how the shipping company Tallink has already calculated that the additional cost from the carbon quota will be around €12 million next year, which will slightly increase the price of ferry tickets.

The desire to reduce carbon emissions in shipping also creates a need to retrofit ships to run on less polluting fuels. While ships currently operate on fossil fuels, future plans increasingly involve electric batteries, methanol, ammonia or hydrogen.

Kaupo Läänerand, deputy secretary general for maritime affairs at the Ministry of Climate, said that due to the high demand for ship retrofitting in the coming decades, Estonia must also take advantage of this.

"It is estimated that retrofitting existing ships could cost [globally – ed.] €3.4 trillion. Estonia has many maritime industry companies that are already doing this worldwide. They don't just do it in Estonia and often, money and jobs do not come back to Estonia. We also have many empty ports due to sanctions against Russia. Cargo volumes have fallen, and they too are looking for new business opportunities," the undersecretary explained.

Kaupo Läänerand mentioned that BLRT Grupp, located at the tip of Kopli, is already retrofitting ships, but the larger retrofit centers are still primarily in Asia or the USA.

To encourage ship retrofitting in Estonia, the government plans to support companies by partially reimbursing the costs associated with retrofitting. Depending on the applicant and other conditions, 5-30 percent of the expenses would be reimbursed.

Läänerand discussed the ministry's plan to request €11 million from next year's state budget for the ship retrofitting initiative, €16 million in 2026, and €26 million in 2027.

According to the ministry's calculations, the economic return from these investments would be tenfold. "Calculations show that this would not only bring revenue back into the economy but also other positive effects. To bring those things here, we must offer this incentive, which could be phased over a fixed number of years. If we can establish ourselves in this position in the global market, the need for the incentive will likely disappear in the future. However, to get the retrofit center up and running here and create certainty for the sector and show that we can do this at a world-class level in Estonia, without having to fly our teams halfway around the world, this incentive is extremely important," he stated.

Läänerand has previously written about how the maritime sector estimates that it is entirely feasible to retrofit two cruise ships, four passenger ferries and six cargo ships annually in Estonia, which could have a positive impact on the economy worth nearly €350 million along with job creation.

Läänerand said that in addition to investment support, grabbing a position for the ship retrofitting center would require one-time investments as well. For instance, he mentioned the need to build hangars in some ports because many tasks cannot be performed under the open sky.

The one-time investment for this would be at least €4 million euros, although infrastructure one-time investment costs could exceed €10 million euros.

"This would simply accelerate the capture of market share and our value proposition on the global market. It would also strengthen our companies' competitive position, which in turn supports the Estonian economy. Seen separately, this is a one-time cost from an investment perspective, additional to the measure, because the measure is annual," Läänerand explained.

The deputy secretary general provided an example, stating that just electrifying the ports of Virtsu and Kuivastu (between the mainland and the western Estonian islands) would require an investment of more than €10 million.

"Definitely, Estonian ports face major investments in order to meet all these Green Deal requirements," Läänerand concluded.

--

Follow ERR News on Facebook and Twitter and never miss an update!