Maritime transport is vital to the European Union’s economy; however, it also contributes significantly to greenhouse gas emissions, posing a challenge in the fight against climate change. Despite being one of the most energy-efficient modes of transportation, the sheer size of the shipping industry leads to substantial emissions. Global shipping emissions amounted to a staggering 1,076 million tonnes of carbon dioxide (CO2) in 2018, accounting for approximately 2.9% of total global emissions caused by human activities. This issue has set forth new regulations for the shipping industry by the European Union, which recognized the need to reduce emissions and embarked on an ambitious journey by officially including shipping under the EU Emissions Trading System (EU ETS). Let’s delve into the key aspects and uncover the impact on the shipping industry.

Picture a world where ships of all flags and ownerships, regardless of their home port, are subject to the EU ETS. This momentous decision by the European Union will take effect in January 2024. From that point forward, ships calling at EU ports will be accountable for their emissions. This includes all emissions from intra-EU voyages and emissions while docked in EU ports. Even for journeys beginning or ending outside the EU, 50% of emissions will fall under the EU ETS jurisdiction.

Compliance with the EU ETS is paramount, and shipping operators must understand their responsibilities. Shipowners and those in charge of ship operations are responsible for adhering to the International Management Code for the Safe Operation of Ships and Pollution Prevention. As ships sail across the seas, they encounter different jurisdictions. Each shipping company’s authority for compliance depends on various factors, such as the country of registration and the ship’s recent port calls.

As the winds of change blow, every ship must navigate through the requirements of the EU ETS. Opening a registry account is crucial for shipping operators under the EU ETS. Established in the Union Registry, this account serves as a gateway to compliance. To embark on this journey, shipping companies must submit supporting documentation to their country’s national administrator, who will carefully review and verify the information provided.

Within the vast seas of emissions, EU Allowances (EUAs) emerge as the primary certificates for ships subject to the EU ETS. These EUAs, created explicitly for the ETS Scheme, account for the emissions generated by ships. To obtain these certificates, shipping operators can engage with licensed financial intermediaries who directly access official exchanges and over-the-counter (OTC) markets where EUAs are traded. The EU ETS plan is to phase out allowances that add complexity to big emitters like shipping operators. The phasing out of allowances refers to the gradual reduction of emission allowances allocated to ships under the EU ETS. This mechanism aims to gradually increase emissions covered by the EU ETS and encourage emission reductions over time. Check the shipping FAQ for details of the phasing out for each ship type.

The voyage toward compliance does not end there. In a parallel narrative, the EU MRV (Monitoring, Reporting, and Verification) regulations come into play. These regulations require ships with 5000 G.t or more, calling at EU ports, to monitor and report their fuel consumption and carbon dioxide emissions during EU-related voyages. A monitoring plan and an emission report, to be verified by an EU-accredited verifier, become integral parts of this journey.

Time is of the essence in this voyage to compliance. Shipping operators must commence monitoring their emissions following specific deadlines and compliance dates.


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