The EU is working to enshrine its climate-targets into law. Aiming to reach both the 2050 climate-neutrality target and the proposed net greenhouse gas emissions reduction target of at least 55% by 2030 are causing the EU to speed up actions to make sure the maritime sector contributes its fair share of reductions necessary to reach the targets.
We sum up some of the initiatives that might impact ship charterers the most. Both the revision of the Monitoring, Reporting and Verification (MRV) Regulation and the EU Emissions Trading System (ETS) Directive, the initiation of the EU taxonomy and the FuelEU initiative are EU actions that address maritime emissions and could impact companies with ships on time charters (TC).
EU Monitoring, Reporting & Verification (MRV) Regulation
The shipping MRV Regulation is the EU’s primary instrument for monitoring, reporting and verifying CO2 emissions from maritime transport. It ensures that a tonne emitted is a tonne reported and makes sure that emissions numbers are comparable. The MRV dataset constitutes a basis for further decarbonizing action in the European maritime sector.
The revision of the EU system for monitoring, reporting and verification of CO2 emissions from maritime transport started in February 2019 with the aim to align it with the International Maritime Organisation’s (IMO) global data collection system (DCS) for the fuel oil consumption of ships. For different reasons the process has grown to encompass a much larger revision, including different amendments that would speed up the decarbonization of the maritime sector.
According to amendments in the shipping MRV regulation, both ship owners and time charterers will have to comply with the requirements related to monitoring, reporting and verifying CO2 emissions from maritime transport.
One of the amendments suggested by the EU Parliament is to define the regulated “company” as “the shipowner or any other organisation or person such as the manager; the time charterer or the bareboat charterer, which has assumed the responsibility for the commercial operation of the ship from the shipowner and is responsible for paying for fuel consumed by the ship;”.
By suggesting this change, the Parliament pushes for a slide of responsibility from ship owners towards charterers who function as commercial operators and are responsible for paying the ship fuel. Up until now, charterers have only been considered shipping costumers, without legal responsibility for shipping emissions. For time charterers this could imply that they are held accountable for shipping emissions under the revised legislation.
The proposed definition of company, together with other suggested amendments in the MRV Regulation, would impose several responsibilities on time charterers.
- Complying with the MRV regulation
Charterers would have to comply with the requirements related to monitoring, reporting and verifying CO2 emissions from the ships they hire on time charter, in line with ship owners.
Furthermore, additional suggested amendments could impose new requirements on the time charter.
- Reducing annual CO2 emissions by 40%
The parliament suggests amendments that would require the time charterer to linearly reduce the annual CO2 emissions per transport work by at least 40% by 2030 as an average across all ships under their responsibility, compared to the average performance of ships of the same size and type. The categories will be the same as reported under the MRV Regulation. To obtain data on transport work, the reporting of 'cargo carried' per voyage would remain mandatory.
- Paying penalties for non-compliance
Time charterers would be held responsible for paying the penalties for not complying with reduction requirements.
- Addressing methane (CH4) and other greenhouse gases besides CO2
The scope of the MRV Regulation is suggested to be extended to embrace methane, and the Commission is asked to specify the methods for determining methane emissions by the end of 2021. In addition, the impact of GHG emissions, other than CO2 and CH4, is to be reported and, where appropriate, accompanied by a legislative proposal to address the question of how to deal with those emissions.
- Responsible for zero-emissions at berth
Emissions from ships at berth or anchored in port amounted to around 6% of the total CO2 emissions as reported under the MRV. Responsible companies shall ensure that, by 2030, no ships under their responsibility emit GHG emissions when at berth.
The revised text of the MRV Regulation is expected to be finalised shortly and adopted amendments are expected to take effect from 1 January 2022.