Cyprus estimated to receive €73 million annually from shipping carbon revenue

Cyprus is estimated to receive €73 million a year in national carbon-market revenue linked to shipping, although substantially larger sums will flow to countries with much smaller maritime industries. A new study by the European Community Shipowners’ Associations (ECSA) estimates that shipping will contribute around €9 billion annually to EU and national revenues if carbon allowances average €100 per tonne. Under a lower-price scenario of €85, the sector’s contribution would still reach €7.65bn. Of the €9bn total, about €7.7bn would reach national governments, while the remainder would be directed towards EU-level financing mechanisms, including the Innovation and Modernisation funds. At €85 per allowance, national revenues would fall to around €6.6bn. However, the money is not distributed according to the size of each country’s merchant fleet, port activity or wider shipping industry. Instead, most national auction revenue is allocated through an EU distribution formula based largely on historical emissions from stationary industries. As a result, Germany would be the largest beneficiary, receiving an estimated €1.67bn annually under the €100 scenario. Poland would follow with €972m, Italy with €787m and Spain with €712m. Meanwhile, landlocked Czechia is projected to receive €376m, more than the combined €229m allocated to Cyprus, Malta and Denmark. Cyprus’ estimated share stands at €73m, compared with €52m for Malta and €104m for Denmark. Under the €85 scenario, Cyprus would receive around €62m, while Germany’s share would fall to €1.42bn and Czechia’s to €319m. Nevertheless, the full ECSA report stresses that these are estimates of the additional national auction revenue associated with the inclusion of shipping in the EU ETS. They are not direct payments from shipping companies to individual governments. Shipping companies buy allowances through auctions or the secondary market, while auction proceeds are distributed separately among national governments and EU funds. Therefore, a country administering a large number of shipping companies does not necessarily receive the money paid by those companies. Instead, governments receive a share of the wider ETS auction pool, meaning there is no directly traceable stream of “shipping money” flowing into a particular national treasury. ECSA also describes its country estimates as an illustrative proxy rather than exact accounting, as the Commission’s detailed auction methodology is not publicly available. Shipping has been included in the EU Emissions Trading System since January 2024. The scheme covers cargo and passenger ships of at least 5,000 gross tonnes, regardless of flag. It applies to all emissions from voyages between European Economic Area ports and while vessels are within those ports, as well as half of the emissions generated on voyages between EEA and non-EEA ports. Methane and nitrous oxide were also brought within the ETS from 2026. Following the scheme’s gradual introduction, shipping companies must surrender allowances covering 70 per cent of their verified 2025 emissions during 2026. Full coverage applies to emissions generated from the 2026 reporting year, with the corresponding allowances surrendered in 2027. However, ECSA said only a limited share of the money raised is being reinvested in maritime decarbonisation. Although the ETS Directive requires national auction revenue to support climate action and explicitly lists maritime decarbonisation as an eligible use, governments are not required to reserve a fixed proportion for shipping. Citing the European Commission’s 2025 Carbon Market Report, ECSA said only around 5 per cent of national ETS revenues had been invested in industrial decarbonisation, while shipping received almost no dedicated support. According to the association, France and Estonia are the only countries to have earmarked specific ETS revenue for maritime projects. ECSA is therefore calling for the upcoming ETS revision to require governments to reinvest part of the proceeds in sustainable marine fuels, cleaner vessel technologies, maritime infrastructure and innovation. The association said sustainable marine fuels remain around four times more expensive than conventional alternatives, while the European shipping sector’s energy-transition investment needs are estimated at about €40bn annually. At the same time, European shipowners account for 44 per cent of the global orderbook for vessels capable of using sustainable fuels. However, Europe produces only around 10 per cent of global sustainable fuels, with less than 5 per cent intended for maritime use, while Asia hosts 74 per cent of planned production projects. The debate comes ahead of the European Commission’s proposals for the next EU ETS framework, which are currently scheduled for July 15. The review will help shape the carbon market for the 2031-2040 period. Assuming maritime emissions remain broadly stable and allowances average €100, ECSA estimates that shipping could contribute around €90bn over the next decade, while surrendering approximately 900 million allowances.