What voyages fall into the scope of the EU ETS?

From January 2024 the EU ETS is extended to cover Co2 emissions from all ships of 5000 gross tonnage or over entering EU/EEA ports.

The system covers:

  1. 50% of emissions from voyages between EU/EEA (EU plus Norway and Iceland) ports and non-EU/EEA ports;
  2. 100% of emissions between two EU/EEA ports and when ships are within EU/EEA ports.

To ensure a smooth transition, shipping companies only have to surrender allowances for a portion of their emissions during an initial phase-in period:

  1. 2025: 40% of their emissions reported in 2024;
  2. 2026: 70% of their emissions reported in 2025;
  3. 2027 onwards: for 100% of their reported emissions.

What Greenhouse gases fall into the scope of the EU ETS?

In the maritime sector:

  1. Currently: Carbon Dioxide (CO2)
  2. From 2026: Carbon Dioxide, (CO2), Methane (CH4), & Nitrous Oxide (N20)

From 2024, the EU MRV regulation will be amended to include N2O and CH4 as reporting items.

What constitutes a Port of Call?

A port of call is the port where a ship stops to load or unload cargo, to embark or disembark passengers, or where an offshore ship stops to relieve the crew. The following stops are excluded:

  1. stops for the sole purpose of refuelling,
  2. stops for obtaining supplies,
  3. stops for relieving the crew (other than an offshore ship),
  4. stops for going into dry-dock or making repairs to the ship and/or its equipment,
  5. stops in port because the ship needs assistance or is in distress,
  6. ship-to-ship transfers carried out outside ports,
  7. stops for the sole purpose of taking shelter from adverse weather or rendered necessary by search and rescue activities,
  8. stops of containerships in neighbouring container transhipment ports (listed in the implementing act to be adopted by the end of 2023).

Stops of containerships in transhipment ports are not considered a Port of Call provided that:

  1. The Port is located outside the EU but less than 300 nautical miles from a port of an EU/EEA Member State; and
  2. The share of transhipment of containers (measured in TEU) exceeds 65% of the total container traffic of that port during the most recent 12-month period for which relevant data is available.

The voyages preceding and following these ports are considered as consecutive voyages.

How is data reported within EU MRV and EU ETS?

Within the EU MRV, data is required to be collected, verified and reported on a ship-by-ship basis.

Within the EU ETS, data is required to be collected at the ship level, but then aggregated for verification and reporting at the company level.

Who is responsible for ensuring compliance with the EU ETS?

The shipping company, or any other organization or person who has assumed the responsibility for the operation of the ship from the shipowner and agreed to take over all the duties and responsibilities imposed by the ISM Code, (ship management company or bareboat charterer etc.) is responsible for aggregating the data collected under the EU MRV and ensuring that the aggregated data is verified and the allowances equivalent to the annual CO2 emissions surrendered each year by the 30th September of the following year.

Where a charterer has operated a ship for the whole or part of a year, the shipping company remains responsible for surrendering the emission allowances to the Administering Authority (AA). However, the shipping company will be entitled to claim reimbursement from the charterer for the EU ETS costs accrued from the charter time.

Who are emission allowances surrendered to?

Emission allowances should be surrendered to the Administering Authority (AA). Each company will have a specific AA based on the following criteria:

  1. For EU registered companies the AA will be the Member State in which the shipping company is registered.
  2. For companies not registered in the EU the AA will be the Member State in which the company has made the greatest number of port calls during the last 4 monitoring years.
  3. For companies not registered in the EU and with no port calls within the last 4 years, the AA will be the Member State where a ship of the shipping company has arrived or started its first voyage in the EU.

The EC will maintain a list of AAs, updating it every two years.

What are the penalties for surrendering sufficient emissions allowance?

If sufficient emission allowances are not surrendered by 30 September each year to cover emissions made during the preceding year, the shipping company will be liable to pay a penalty of €100 per tonne of CO2 equivalent emitted per emission allowance not surrendered. Additionally, the company must surrender the missing emission allowances in the following reporting period.

Where a shipping company has failed to comply with the emission allowance surrender requirements for two or more consecutive reporting periods, an expulsion order may be issued to the shipping company by the competent authority of the member state of the port of entry. As a result, any ships operating under that company will be refused entry to any EEA port other than that of the EEA member state whose flag the ship is flying. The ship may be detained if the ship enters the port of an EEA member state whose flag it is flying. This expulsion order will remain in place until the company fulfils its emission allowance surrender obligations.