You may have heard of the EU’s ETS1 for major users of fossil fuels, but are you aware of ETS2 and its UK equivalent, which is set for 2028 and aimed at smaller businesses? The implications for transport and transit packaging are significant – firmly raising the specter of oversized boxes as a financial liability. Chris More looks ahead at how packers and transport companies can lessen the blow…

The European Union has been operating an Emissions Trading System for a number of years. Under this, major emitters of Greenhouse Gases – principally but not solely CO2 – have to ‘pay’ for their emissions through credits, and if they haven’t got enough, they can buy more in a marketplace from other businesses with a surplus.

This has been aimed at electricity generation and other major users of fossil fuels including many producers of packaging materials including board, production of which involves a number of energy-intensive processes. While some producers may enjoy ‘net zero’ energy such as hydroelectricity, and thus not need to buy credits, pulp and board are internationally traded commodities, so any savings may not necessarily be passed on to to the customer.

In a further step in line with the EU’s ‘Fit for 55’ climate package, the EU is ramping up for ‘ETS2’, to be in full operation from 2028, which targets energy use in transport, buildings, and industries below the threshold for ETS1. The scheme is similar to ETS1, except that the credits are required from fuel suppliers, rather than from end users.

And besides the cost of acquiring credits, companies within the scope of ETS will face quite significant compliance and administrative costs which will also be reflected in fuel pricing.

What does it all mean for packers?

‘But, so what?’ a typical packing line operator might ask. ‘We aren’t suppliers, or major users, of fossil fuels and anyway the UK isn’t even in the EU anymore’.

Well, firstly the UK has its own carbon trading system, similar though not identical to ETS, and government policy is to converge on, or even integrate with, the European carbon trading regime – subject to domestic politics, of course, but talks are already under way as part of the proposed ‘reset’ of UK-EU relations.

Second, a lot of the card and board we use comes from Europe. World Bank figures show that in 2024 we imported cartons, boxes, cases and board worth US$ 331 million, with over US$ 30 million coming from each of Poland, Ireland, Germany and The Netherlands. Pricing includes the costs of ETS, but bear in mind that this is not a one-off increase – the trading market is being progressively tightened so that the increasing cost of credits continues to incentivise the transition to net zero. This has already shown significant progress, but the snag is that switching the energy source for large scale industrial processes (such as pulp and board manufacture) is a ‘once in a generation’ investment. Until that investment can be justified, industries, and therefore their customers such as packers, will just have to suck up the increasing cost of credits.

Impact on transport businesses

Meanwhile, ETS2 will similarly load costs unto transport operators and therefore on the carriage charges that our parcels and packages, and thus our end customers, incur. It will also impact the cost of fuel for space heating, which may be relevant to the climate control of packaging material storage. Again, the credits market is designed to ratchet up over time and so, to the extent that transport firms delay a switch to, for example, electric vehicles, the extra costs will become increasingly significant.

What to do? Well, the obvious solution is to use less board and less transport. That may sound flippant, but in fact there is a ready route to achieving this – right size packing.

It is commonplace that orders are often despatched in oversized, sometimes grossly oversized, boxes. This is not only annoying for consumers but a waste of increasingly expensive material – already subject to other charges under rules such as the Extended Producer Responsibility regulations. There are further costs in unnecessary void fill in materials such as bubble wrap that will also have been affected by ETS. Additionally, it means that a significant proportion of transport costs may be incurred essentially to ship empty space.

Size matters

The Packsize approach – using sophisticated scanning to calculate, cut and erect boxes that are just the ‘right size’ for each individual consignment, of single or multiple items, directly addresses all these wastes. Users of Packsize automated lines report savings of up to 30% in board use – combined with the virtual elimination of void fill, that can mean a third off packaging material costs. Some businesses may even find that by using one or a few standard feedstocks for a packing line, rather than an array of preforms or pre-assembled boxes, there are economies to be made in the space, and thus space heating, requirements for their packaging materials. That is quite apart from the very significant gains in productivity, labour utilisation, and damage and error reduction that on their own make a strong investment case.

Normally, the authorities frown on tax avoidance, but ETS is a case where they really do want us to reduce our liabilities. In time, as material manufacturers, transport operators and others transition to net zero operations, the hope is that regimes such as ETS will become redundant. But that time is some way, perhaps decades off. Meanwhile, ETS provides yet another incentive, if one should be needed, to invest in right size packing solutions.

For businesses seeking more efficient, less wasteful transit packaging, full information on Packsize’s extensive range of transit packaging solutions can be found at www.packsize.co.uk