The Cost of Inaction in Shipping: The Case of the European Union's Emissions Trading System and the Energy Taxation Directive

Abstract

This thesis examines the cost implications of sustainability inaction within the shipping industry. By employing a discounted cash flow approach and forecasting until 2050,we assess the influence of the European Union’s Emissions Trading System and the revised EnergyTaxation Directive on the share prices offive shipping firms across three scenarios. These scenarios encompass full decarbonization by 2050, achieving the goals outlined in the International Maritime Organization’s Greenhouse Gas Strategy, entailing a 50% reduction in totale missions, and a trajectory aligned with the long-term growth of each company. Our analysis reveals that scenario 1 yields the highest share prices,followed by scenario 2 and scenario 3,highlighting potential costs associated with neglecting sustainability initiatives. However,the diferences across the scenarios are generally marginal, indicating that the regulations and associated costs have limited impact on share prices, regardless of the chosen emission trajectory. Additionally,our findings suggest that the regulations will affect the industry in an uneven manner, potentially disrupting competition based on specific market segments.