I found this article very informative. It’s from Bureau Veritas, a classification society based in the EU.
It makes very clear how the EU’s emissions trading system (ETS) will work for the maritime industry. It’s part of the Fit for 55 package that aims to reduce emissions by maritime and other sectors in the EU.
The timeline is very important for shipowners and ship charterers. The rules require payments for emission credits, so there will be a financial impact. It remains to be seen how chartering contracts will divide the costs of the credits between shipowners and charterers, but the financial burden will be there.
Most people agree that the emissions trading credit system is an extremely important motivator for participants in the maritime industry to get serious about reducing emissions. We are seeing activity now to reduce emissions, but the pace has to pick up if the EU goals of a 55% reduction by 2030 are to be met. Investment is needed, and internalizing the cost of emissions through the trading of credits is an important lever to use. It’s a good example of a sensible regulation to impel action. More nations should try it.
The FAQ format of the article makes it easy to see the answers.
One unfortunate issue is the somewhat longer time frame for implementation of the ETS; the first bite starts in January 2024, covering 40% of emissions. This escalates to 70% in 2025 and 100% in 2026. Another critique of the system is that for ships that either enter or exit the EU ports fro outside the EU, they only pay for half the emissions. It’s a compromise that is necessary, since nations outside the EU might have their own emissions trading regimes, or none at all. Having it apply only to EU port visits insures more cooperation.
The basis of the trading is an updated MRV plan, which must be kept updated. There will be an accredited verifier of the plan for each fleet owner. The fleet’s individual greenhouse gas (GHG) emissions must be monitored from January 1 of 2025, and a report submitted by March. Then by September, the emissions will be calculated (surrendered, in the words of the document) and the emissions credits purchased on 40% of it.
Penalties include expulsion orders from EU ports, or a flag detention order until obligations are fulfilled, for EU member state flagged ships.
EU Emissions Trading System Directive | Bureau Veritas M&OEU Emissions Trading System Directive | Bureau Veritas M&O