From 1 July 2026, the scheme is set to expand to include domestic maritime transport. Shipping companies will therefore need to monitor emissions, report them to regulators, and surrender UK ETS allowances for emissions falling within the scheme.

For shipping, UK ETS represents a shift from pure emissions reporting toward direct financial exposure to carbon emissions, meaning emissions performance becomes a commercial factor in voyage planning, fleet operation, and fuel strategy.
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Overview

Under UK ETS, operators must obtain and surrender UK ETS allowances equal to their verified greenhouse gas emissions. Each allowance represents one tonne of CO₂ equivalent emissions.

Allowances are traded on the UK carbon market and therefore have a market-based price, meaning the cost of compliance varies depending on market conditions.

The maritime extension of the scheme is designed to introduce a carbon cost into domestic shipping operations. The objective is to create incentives for operators to:

• adopt lower-carbon fuels
• improve energy efficiency
• invest in low-emission technologies
• optimise operational practices

The UK government has stated that extending UK ETS to maritime transport is part of the wider strategy to decarbonise all sectors of the economy in support of the UK’s net-zero target by 2050.

Scope

Geographical coverage:

The maritime extension of UK ETS initially applies only to domestic maritime voyages within the United Kingdom.

A domestic voyage is defined as a voyage between two UK ports. This includes situations where:

• the voyage begins and ends at the same UK port
• multiple UK ports are visited during a voyage
• vessels move between port locations, anchorage areas, or berths.

Emissions generated during port operations, including manoeuvring, anchoring and shifting operations, are included.

Voyages between the UK and Crown Dependencies or Overseas Territories are not treated as domestic voyages.

International voyages

International voyages are not fully included in the scheme at the initial stage. However, emissions generated while vessels are in UK ports are included.

The UK ETS Authority is consulting on expanding the scheme from 2028 to include 50% of emissions from international voyages between a UK port and a foreign port, broadly similar to the structure used in the EU ETS.‍

Ship size threshold:

The scheme applies to ships of 5,000 gross tonnage (GT) and above.

Offshore vessels are excluded from the initial scope in July 2026 but are scheduled to enter the scheme from 1 January 2027.

‍Voyage Coverage:

UK ETS applies to the following emissions:

• 100% of CO₂e emissions during a port call at a UK port, including port calls in Northern Ireland
• 100% of CO₂e emissions from an intra-UK voyage leg, where neither port call is in Northern Ireland
• 100% of CO₂e emissions from an intra–Northern Ireland voyage leg
• 50% of CO₂e emissions from a voyage leg between Northern Ireland and Great Britain (England, Scotland or Wales)
• 0% of CO₂e emissions from voyages with no UK port call
• 0% of CO₂e emissions from port calls outside the UK

Greenhouse gases covered:

The maritime extension covers three greenhouse gases:

• Carbon dioxide (CO₂)
• Methane (CH₄)
• Nitrous oxide (N₂O)
• Emissions are aggregated using IPCC AR5 global warming potential values.

The scheme uses a tank-to-wake accounting approach, meaning emissions are calculated based on fuel combustion during ship operations.

Methane slips and nitrous oxide emissions are therefore included in the emissions calculation.

Exemptions:

Several categories of vessels and activities are excluded from the maritime scope.

Examples include:

• warships and naval vessels
• fish-catching and fish-processing vessels
• government ships used for non-commercial purposes.

Government Non-Commercial Maritime Activities (GNCMA) are exempt. These include vessels used for:

• military operations
• customs and border control
• police services
• coastguard operations
• search and rescue missions
• medical support
• government research activities
• lighthouse authority operations.

In addition, ferry services serving certain Scottish island and remote peninsula communities are exempt due to their essential role in providing transport links for remote populations.

Start date

The implementation schedule is:

• 1 July 2026: domestic maritime emissions enter UK ETS
• 1 January 2027: offshore vessels become subject to the scheme
• Proposed 2028: inclusion of 50% of emissions from international voyages

The first compliance period for maritime runs from 1 July 2026 to 31 December 2026.

From 2027 onward, compliance periods follow the calendar year.

To facilitate the transition into the scheme, the UK ETS Authority has introduced a double-surrender arrangement for the first two maritime compliance years.

Under this system:

• emissions from 2026 must be reported in 2027, but allowances are surrendered in 2028
• emissions from 2027 are also surrendered in 2028

This provides operators additional time to integrate into the scheme.

Responsibility

Responsibility for compliance lies with the registered owner of the vessel by default.

However, responsibility may be transferred to the ISM company if a legally binding agreement assigns the monitoring and compliance obligations to that entity.

This structure is broadly similar to EU ETS rules, although the UK ETS framework places stronger emphasis on the registered owner as the default responsible entity.

Charterers are not responsible parties under UK ETS.

Cost Impact

UK ETS introduces a carbon price exposure for shipping companies.

Each tonne of greenhouse gas emissions must be covered by surrendering one UK ETS allowance. The cost therefore depends on the market price of UK allowances (UKAs).

Because allowance prices fluctuate, the carbon cost per voyage can vary significantly over time.

This introduces a new economic factor into maritime operations, similar to fuel price volatility.

Operators therefore face increasing incentives to:

• reduce fuel consumption
• improve operational efficiency
• consider alternative fuels
• optimise voyage planning.

Compliance mechanism

1. Monitoring, reporting and verification (MRV)

Operators must prepare an Emissions Monitoring Plan (EMP) outlining the methodology used to measure and calculate emissions from vessels covered by the scheme.

During each scheme year, operators must monitor emissions in accordance with the approved monitoring plan and submit a verified Annual Emissions Report (AER) to the regulator.

The monitoring plan is submitted to the regulator before reporting begins.

Verification must be performed by UKAS-accredited verifiers.

Monitoring and reporting are managed through the METS reporting system.

2. Allowance management

Operators must hold UK ETS allowances in the UK ETS Registry.

After emissions have been verified, companies must surrender a number of allowances equal to their verified emissions.

Commercial and operational implications

The introduction of UK ETS into maritime transport affects more than regulatory compliance. It also changes how shipowners, operators and charterers think about day-to-day commercial and operational decisions.

Carbon cost becomes part of voyage economics, not just a reporting outcome. That influences fuel strategy, as lower-carbon fuels can reduce allowance exposure. It also strengthens the business case for fleet efficiency improvements and may shape investment decisions around energy efficiency measures and alternative propulsion technologies. In parallel, UK ETS is likely to become a more visible issue in charter party negotiations, particularly where parties need to agree how carbon costs are allocated.

Carbon exposure therefore becomes an explicit line item in voyage profitability, rather than solely a sustainability metric.

UK ETS vs EU ETS

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