Inclusion of shipping in EU ETS - agreement by EU legislators

The idea of adding the maritime sector to the EU’s carbon market was first raised a decade ago, but on Tuesday 29th December EU legislators finally reached an agreement.

From the charterer's perspective these are the most important takeaways from the agreement:  

• There will be a three year phase-in for the shipping industry 
            - 40 % of emissions reported in 2024 will have to be paid for in 2025 
            - 70 % of emissions reported in 2025 will have to be paid for in 2026
            - 100 % of emissions reported in 2026 will have to be paid for in 2027 
• 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 InternationalMaritime 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 cargo and passenger ships above 5,000 GT
• Offshore service vessels are to be included in the MRV system from 2025 and in the ETS from 2027
• Ships of 400 gross tonnage and above is to be included in the MRV in 2025 to evaluate whether they are to be included in the ETS from 2027
• The Innovation Fund is strengthened with 20 million extra allowances, and there will be dedicated calls to decarbonise the maritime sector under the Innovation Fund
• Failure to surrender emission allowances may lead to fines and refusal of port calls
• The shipping company will be responsible for the compliance with the EU ETS however, the shipping company will be entitled to claim reimbursement for the compliance costs from the entity that is directly responsible for the decisions affecting the CO2 emissions of the ship

The agreement on the maritime sector was only one part of a wider revision of theETS. The negotiations will continue, with the next and potentially final talks due to start 16th December. Read updated article. 

It is now clear that shipping emissions will have a cost from 2024. Charterers will be impacted by increased freight costs and should start preparing. By understanding how their chartering and shipping decisions influence emissions, charterers can reduce emissions and cost exposure. Contact the Siglar Carbon experts to get prepared.

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