Emissions Trading for Shipping

Inclusion of Shipping under the EU Emissions Trading Scheme (EU ETS)

The EU has now finalised regulations to cover emissions under the maritime sector from 2024, initially covering cargo and passenger ships over 5,000 gross tonnes. The EU ETS is a cap-and-trade scheme that limits greenhouse gas emissions from included sectors. It initially began in 2005 covering power generation and industry and expanded to aviation in 2012.

The shipping sector will be phased-in for compliance with owners required to purchase an increasing percentage of EU Allowances (EUAs) to cover annual verified emissions, as follows:

  • 40% (of annual emissions) in 2024
  • 70% in 2025
  • 100% from 2026

The scheme targets 100% of emissions from voyages between EU/EEA ports and compliance will also be mandated on 50% of total voyage emissions to and from non-EU/EEA ports, with a mechanism to avoid ships stopping in "trans-shipment" ports. There will be no free allocation of allowances to the maritime sector

Shipping companies now need to understand the EU ETS carbon market, the impact on their operations and develop a strategy to manage compliance costs.

Risks to manage

Market Volatility

The maritime sector is entering the EU ETS at a time of record carbon prices and significant volatility in the EU carbon market. Shipping operators face a challenging requirement to understand regulations, keep up to date with the carbon market and develop an effective strategy to manage compliance costs.

Define Responsibility

The shipping sector has a unique set of operational and contractual complexities that present a challenge to managing EU ETS compliance and purchase the required allowances. The responsible entity for compliance will be the 'Shipping company' or owner of a vessel (as per the ISM-Code) but operators and charters may be commercially and contractually responsible for the EU ETS pass through cost.

Carbon Compliance

Accessing the carbon market requires a number of steps to be completed prior to trading which should be started as soon as possible. Given the volatility of the EU Carbon Market, there should be a clear strategy to manage allowance purchases and reconcile costs against voyages.

How we can help?

As a recognised expert in the EU ETS with over 15 years experience in carbon markets, CF Partners are uniquely positioned to help Shipping Owners, Operators and Charterers manage their EU ETS compliance needs. We can help you:

Market Expertise

Understand EU ETS policy, identify compliance requirements and evaluate the impact on your business.

Risk Management Solutions

Navigate the carbon market and help to develop a compliance strategy appropriate to your needs

Compliance Support

Understand the different product solutions and take into account any pass-through costs

Market Intelligence

Provide a full compliance solution – we will manage and arrange allowance purchases in a cost effective and efficient manner

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