Ten Estonian shipping companies are set to be affected by the emissions trading scheme. While the relevant draft bill has only just been sent for approval in Estonia, the rules have been in place across the rest of Europe for some time. This means that ship owners will have to pay for 40 percent of emissions this year, 70 percent next year and all emissions in 2026.

Referring to an analysis made by the Ministry of Climate, Kaupo Läänerand, the ministry's undersecretary for maritime affairs, said the impact of the change on Estonia's shipping sector will be huge. Ten of the country's biggest shipping operators could end up making losses in the coming years.

"If the price of CO2 stays at this level, then indeed, if they do not pass that on to the customer or the consumer, it could reduce their profits and turn into losses. These numbers are pretty brutal, however, this is not just a challenge for Estonian shipowners, but for the whole of Europe," Läänerand said.

According to the analysis, if companies pass half of the extra cost on to the consumer, ticket and freight fares will increase by around five percent.

Estonia's largest shipping company, Tallink, will be most affected. If CO2 prices remain at their current level, the company will have to purchase €20 million-worth of allowances in 2026. If the price of CO2 on the stock exchange rises, it will cost even more. Läänerand explained that Tallink ships use more fuel than others due to the speed they travel at.

"It would be much more economical to sail at ten knots, but customers want the ship to arrive quickly with their Christmas presents. They also want to get home from Finland and Sweden quickly and promptly," said Läänerand.

Läänerand stressed that all shipping companies have to begin thinking about reducing their fuel consumption. And lowering speeds is only one of several options.

"Put a different color on the hull to reduce friction. New propellers are very efficient. There are a lot of IT solutions that reduce fuel consumption and constantly give suggestions about how to do better," Läänerand said.

A major investment would be required to rebuild a ship's main engine so that it can use more sustainable fuel. However, new technologies are also expensive, and more sustainable fuel cost two to three times more than those currently being used.

"The European Union's aim is to kick-start this drive using this scheme to get more green fuels and green technologies onto the market. If they are coming in on a large scale, they should become cheaper. It's a kind of like marathon, where it's very difficult to start with but at the end, if everyone makes an effort, theoretically, it will get better," said Läänerand.

Läänerand pointed out that part of the money raised from the purchase of CO2 quotas will go to the state and part will go directly to the European Union. Both the state and the EU also have planned measures to support the conversion of ships.

"The worst thing that ship owners can do is to not make plans, not look for solutions and not take steps toward knowing what solutions are available and where they can get the funding. Because if you can get a significant amount of support from the European Union, you will have to pay for fewer quotas. It's the same if you use this measure for the conversion of Estonian vessels, which will be rolled out next year. All of these should be used to the maximum," said Läänerand.

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