Inclusion of shipping in EU ETS – new details impacting charterers

Official compromise texts on the revision of the EU emissions trading system (ETS) were made available last week, confirming and revealing details of its design. Here is the updated list of changes that we think will impact charterers the most.

Phase-in

• The phase-in of requirements for the shipping industry is scheduled as follows:
  - 40 % of emissions reported in 2024 to be paid for in 2025
  - 70 % of emissions reported in 2025 to be paid for in 2026
  - 100 % of emissions reported in 2026 to be paid for in 2027

Scope

• 50 % of emissions from voyages into and out of the EU/EEA will be covered by the ETS (to be reviewed in 2028 in light of International Maritime Organization (IMO) progress on adopting a global marked-based measure)
• Methane and nitrous oxide will be included in the reporting system (MRV) from 2024 and in the ETS from 2026
• The EU ETS will apply to ships above 5 000 GT transporting cargo and passenger for commercial purposes
• Offshore service vessels are to be included in the MRV system from 2025 and in the ETS from 2027
• General cargo and offshore ships between 400 and 5 000 GT are to be included in the MRV in 2025, by the end of 2026 the EU commission will evaluate whether to include these ships in the ETS

Responsibilities

• The shipping company (ISM manager) is responsible for complying with the ETS directive and surrendering the right amount of allowances
• The shipping company is entitled to pass on the ETS cost to the charterer, regardless of type of contract
• The shipping company's right to claim reimbursement for the costs arising from the surrender of allowances should be enshrined in national law

The inclusion of maritime transport in the ETS will lead to an increase of 78.4 million allowances/million tons of CO2 in the European cap and trade system

The final compromise texts on the ETS revision proposal were released in relation to the endorsement by the European Council’s Permanent Representatives Committee on 8^th February 2023 and by the European Parliament’s environmental committee on 9^th February 2023.  

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Read more about how the EU carbon cost will impact freight costs or contact the Siglar Carbon experts to get prepared for the ETS and carbon cost in shipping.