Almost one and a half year after the European Commission proposed to extend the scope of the EU Emissions Trading System (EU ETS) to also cover greenhouse gas emissions from maritime transport, the EU has reached a final agreement on a revised version of the EU ETS.
On 14 July 2021, as part of the "Fit for 55" package, the Commission published a proposal for a revision of the EU ETS, to align it with the target of a 55% reduction of greenhouse gas emissions by 2030, compared to 1990 levels. The Commission's proposal has been subject to extensive discussions in the European Parliament and the European Council since it was published.
On 18 December 2022, EU institutions agreed to reform the EU ETS – almost one and a half year after the Commission's proposal. An important part of the revision has been to include emissions from maritime transportation, and the regulation will now require ship operators to pay for their greenhouse gas emissions for the first time.
The details on how to include emissions from maritime transportation in the EU ETS were agreed upon in a provisional agreement reached on 29 November 2022:
- Shipping companies have to surrender allowances that cover 40% of their verified emissions in 2024, 70% in 2025 and 100% in 2026.
- 100% of emissions from intra-European routes and 50% of emissions from extra-European routes to and from the EU, will be covered.
- The EU ETS will be extended to cover methane (CH₄) and nitrous oxides (N₂O), not only CO₂, from 2026.
- The EU ETS will apply to all cargo vessels and passenger ships over 5,000 gross tonnes.
- Offshore service vessels of 5,000 gross tonnes or more will be included in the MRV Regulation on the monitoring, reporting and verification of CO₂ emissions from maritime transport from 2025 and included in the EU ETS from 2027.
- General cargo vessels and offshore vessels between 400 – 5,000 gross tonnes will be included in the MRV Regulation from 2025 and their inclusion in the EU ETS will be reviewed in 2026.
- Failure to surrender emission allowances may lead to the imposition of fines and ultimately also refusal of port calls.
Parliament and Council will have to formally approve the agreement before the new law can come into force.
As it is now clear that emissions from maritime transportation will be included in the EU ETS, ship owners, operators and managers should start preparing on how to comply with the requirements in 2024. Preparations should include, for example, assessing to what extent its vessels (by trade and size) will be required to surrender EU ETS emission allowances, implementing contractual regulation for the purchase and surrender of emission allowances and also means to monitor compliance with the EU ETS.