The EU Emissions Trading System (EU ETS) is the European Union’s carbon pricing mechanism, and from 2024 it includes maritime transport. It places a cost on greenhouse gas emissions from ships by requiring companies to monitor emissions (under EU MRV) and surrender tradable emission allowances.

For shipping, EU ETS represents a shift from pure reporting to direct financial exposure to carbon emissions, making emissions performance a commercial factor in voyage planning, chartering, and fuel strategy.
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Overview

Under EU ETS, shipping companies must purchase and surrender EU Allowances (EUAs) corresponding to a share of their verified greenhouse gas emissions. These allowances are traded on the carbon market, meaning the cost of compliance fluctuates with EUA prices.

The system follows a “cap-and-trade” model at EU level (with an overall emissions cap for covered sectors), but for individual voyages or ships there is a financial liability, with no fixed limit tied to emissions.

Scope

Geographical coverage:
‍All EU Member States plus EEA countries (Norway, Iceland, Liechtenstein).

Ship size threshold:
Applies to ships of 5,000 gross tonnage (GT) and above.

‍Voyage coverage:
EU ETS covers emissions from:

· 100% of emissions on voyages between two EU/EEA ports

· 100% of emissions while at berth in an EU/EEA port

· 50% of emissions on voyages between an EU/EEA port and a non-EU/EEA port

This makes EU ETS relevant not only for intra-European trade, but also for deep-sea voyages with an EU connection.
What counts as a “port of call” ?

A port of call is where a ship stops to load/unload cargo, embark/disembark passengers, or (for offshore ships) relieve crew. Several stop types do not count (e.g., refuelling-only, taking supplies, repair/dry-dock, distress/assistance, shelter from weather, certain ship-to-ship transfers, and specific container transhipment port situations).

‍Greenhouse gases covered:

· CO₂ – covered from 2024

· CH₄ (methane) – covered from 2026

· N₂O (nitrous oxide) – covered from 2026

This broadens the impact beyond fuel consumption alone, especially for LNG-fueled vessels where methane slip becomes commercially relevant.

‍Exemptions:

The following vessel types are excluded:

· Warships and naval auxiliaries

· Fishing vessels

· Government ships used for non-commercial purposes

Most commercial cargo and passenger vessels above the size threshold are therefore in scope.

Phase-in schedule

Shipping is gradually phased into full financial exposure:

· 2024: Companies must surrender allowances for 40% of verified emissions

· 2025: 70% of verified emissions

· From 2026 onwards: 100% of verified emissions

The phase-in reduces short-term shock but clearly signals full carbon pricing in the near term.

Responsibility

The shipping company is responsible for compliance, even if many commercial decisions are taken by charterers.

For ETS/MRV purposes, the shipping company is the shipowner or another entity (manager/bareboat charterer) that has assumed ISM Code responsibilities—but the registered owner is responsible by default unless

there is documented agreement mandating the ISM Company to assume ETS/MRV obligations.

Regardless of how tasks are delegated, the shipping company remains the entity responsible for surrendering allowances.

Where another entity determines cargo/route/speed and/or purchases fuel under contract, the shipping company is entitled to reimbursement for surrendering costs, with Member States required to enable enforcement. In practice, parties are expected to implement contractual clauses reflecting this cost allocation.

Cost Impact

EU ETS introduces a variable carbon cost per tonne of CO₂e emitted, determined by the market price of EU Allowances (EUAs).

· Each 1 tonne of CO₂e = 1 EUA to be surrendered

· EUA prices have continued to be strong in 2025; market data shows EU Allowances typically trading roughly between about €65 and €80 per tonne of CO₂e, with averages around €75 / t in 2025

Because prices are market-based, the carbon cost per voyage can change materially over time, turning EUA exposure into a commercial risk factor similar to fuel price volatility.

Compliance mechanism

1. Monitoring

· Companies must have a monitoring plan per ship and submit it through THETIS-MRV; verifiers assess it, and administering authorities approve it through THETIS-MRV (Member States may add national steps).

· (As set out in the step-by-step section) monitoring plans for ships in scope were to be submitted by 1 April 2024, already assessed by a verifier as conforming. For ships entering scope later, submission is due within 3 months after the first relevant EU port call.

2. Monitoring, reporting, and verification (MRV) workflow

· Reporting continues via THETIS-MRV, which supports publication of reliable emissions data and now reflects ETS/MRV updates.

· Each year, companies submit:

o a ship emissions report for each ship, and

o a company-level emissions report aggregating ship data for ETS purposes.

· Verification is performed by EU Member State–accredited verifiers, selectable regardless of flag or company location; a company may use different verifiers across ships and reports.

3. Union Registry readiness

· Shipping companies open a Maritime Operator Holding Account (MOHA) in the Union Registry, in the Member State of their administering authority.

· Shipping companies do not need a special maritime allowance; they use standard EUAs like other ETS sectors.

Allowance surrender deadlines (EU ETS – maritime)

Under the EU ETS, shipping companies must surrender EU Allowances (EUAs) each year to cover the verified greenhouse gas emissions from the previous calendar year. This surrender obligation is a key compliance step in the carbon pricing cycle and is tied to both the reporting timeline and the phase-in schedule of the maritime extension of the EU ETS.

Annual compliance cycle

1. Emission monitoring & reporting Throughout the calendar year, companies monitor and record emissions data for all voyages and fuel use in scope (per EU MRV requirements). This data must then be aggregated at company level and submitted to the relevant authorities by 31 March of the following year. The reported emissions serve as the basis for EU ETS obligations.

2. Verification The emissions reports must be independently verified by an accredited verifier before they can be used for surrender compliance. This verification is typically completed by the end of March so that the data can be uploaded into the EU ETS Union Registry.

3. Allowance surrender deadline – 30 September The shipping company must surrender sufficient EUAs in the Union Registry by 30 September of each year to cover the required share of verified emissions from the previous year. For example:

o By 30 September 2025, companies must surrender allowances covering 40% of verified emissions from 2024.

o By 30 September 2026, companies must surrender allowances covering 70% of verified emissions from 2025.

o From 30 September 2027 onwards, companies must surrender allowances covering 100% of verified emissions from the previous year.

Why the deadline matters

· The 30 September surrender deadline is fixed across all EU Member States and sets the final point in the annual compliance cycle for maritime emissions obligations. Failure to surrender the required number of allowances by this deadline triggers enforcement actions.

· It is important to note that surrender deadlines were moved from 30 April to 30 September under recent EU ETS reforms to allow more time for MRV reporting, verification, and registry entry.

Consequences of missing the deadline

· If allowances are not surrendered by the deadline, companies face a penalty of €100 per tonne of uncovered CO₂ equivalent emissions (in addition to still having to surrender the missing allowances).

· Continued non-compliance can lead to more severe sanctions, including restrictions on trading in EU ports for the company’s fleet.

Commercial and operational implications

EU ETS affects more than compliance tasks. It also influences:

· Voyage economics (carbon cost per leg)

· Fuel choice decisions (lower-carbon fuels reduce EUA exposure)

· Speed and routing strategies

· Charter party negotiations (allocation of EUA costs between owner and charterer)

· Investment decisions in efficiency and alternative fuels

Carbon exposure is now a line item in voyage P&L, not just a sustainability metric.

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