WALLEM Navigating the EU ETS User Guide
- June 5, 2024
- WALLEM
Table of Contents
WALLEM Navigating the EU ETS
FAQ
Frequently Asked Questions
- Q: What ships are included in the EU ETS scope?
- A: Cargo and Passenger ships above 5,000 GT, Offshore ships above 5,000 GT, and general cargo ships between 400 – 5,000 GT are included in the EU ETS scope.
- Q: When do maritime operators need to surrender EU ETS allowances?
- A: Maritime operators must surrender EU ETS allowances for their ships’ emissions by 30 September of the year following the year in which the emissions were reported.
Background
The European Union (EU) has formally adopted a broad set of laws to implement the “Fit for 55” policy package, including a landmark reform of the European Union Emissions Trading System (EU ETS). This is part of the plan for the shipping industry to become carbon neutral by 2050, with a 50% reduction in greenhouse gas emissions by 2030.
Carbon Neutral by 2050
Building upon the 2030 Climate Target Plan, the framework includes a more ambitious reduction target for emissions by 2030 in the sectors covered by the EU ETS to 62% of 2005 levels; expands the EU ETS to cover maritime shipping; phase out of free allocation in some sectors in a move accompanied by the phase-in of the Carbon Border Adjustment Mechanism (CBAM); revise parameters for the Market Stability Reserve (MSR); introduces a new and separate ETS for buildings, road transport, and additional sectors (ETS 2); and strengthens the commitment to use ETS revenues to address distributional effects and spur innovation.
What is EU ETS
The EU ETS is an emission cap-and-trade system that aims to reduce greenhouse gas (GHG) emissions by setting a limit, or cap, on GHG emissions for certain sectors of the economy. The cap is reduced over time so that total emissions fall. It is the EU’s main tool in addressing emissions reductions, covering about 40% of the EU’s total CO2 emissions. Within the cap, operators buy or receive emissions allowances, which they can trade with one another as needed. After each year, an operator must surrender enough allowances to fully cover its emissions, otherwise heavy fines are imposed. If an installation reduces its emissions, it can keep the spare allowances to cover its future needs or sell them to another operator that is short of allowances.
What does the EU ETS
What does the EU ETS mean for the shipping sector?
From 2024 the EU ETS will include ships 5000 GT and above transporting cargo or passengers for commercial purposes. The EU MRV system will be extended from 2025 to apply to offshore ships above 400 GT and general cargo ships between 400 and 5000 GT transporting cargo for commercial purposes.
Offshore ships 5000 GT and above will, from 2027, be included in the ETS. By 2026, the European Commission will review whether general cargo and offshore ships between 400 and 5000 GT will also be included in the ETS.
ETS Voyages And ETS Compliance Cycle
ETS Voyages
From 2024 all ships traveling to and from European ports, of all flags, regardless of their port of origin, will be subject to ETS obligations, where voyages are within the EU/EEA, 100% of emissions are subject to the EU ETS. In cases where voyages take place between EU/EEA and non-EU/EEA, the scheme applies to 50% of emissions. Container ships stopping in transshipment ports outside the EU/EEA but less than 300 nm from an EU/EEA port, need to include 50% of the emissions for the voyage to that port as well, rather than only the short leg from the transshipment port. The EU will provide a list of transshipment ports.
Maritime operators must compulsorily open an account in the Union ETS Registry to trade EUAs (EU Allowances), submitting the necessary documentation to the operator’s home national administration, which will collect and verify the information. Importantly, from 2024 all ships entered in the system will not receive free allocation of allowances, and thus permission to pollute will have to be purchased through the auction mechanism or authorized financial intermediaries.
ETS Compliance Cycle
Necessary Actions by a Shipping Company
- Register their ships with the relevant administering authority (AA).
- Develop and implement a monitoring plan for their ships. This plan must be assessed by an accredited verifier and will be approved by the AA. The monitoring plan must specify how the Ship Owner will collect and report data on their ship’s emissions.
- Monitor and report their ships’ emissions annually. This data must be submitted to the relevant administering authority by 31 March of the following year.
- Owners depending on the charter party requirements need to ensure they deliver reliable, validated vessel emissions data to charterers in a timely manner (BIMCO proposes a clause whereby owners provide this within the first seven days of each month, covering the previous month’s allowance requirement).
- Surrender EU ETS allowances (EUA’s) for their ships’ emissions. This must be done by 30 September of the year following the year in which the emissions were reported.
- Owners need to have a Marine Operator Holding account to receive, procure, and surrender EUA’s.
- Obtain required EU ETS allowances (they need to obtain them but not necessarity purchase them, i.e. can obtain from charterers).
- Keep records of their ship’s emissions and allowance transactions.
- Pay financial penalties if they fail to comply with the EU ETS regulation.
- Enter contracts with their ship managers or other parties to ensure that ETS obligations are met.
What Wallem will offer
- Regular evaluations and adjustments to the solution to meet any new regulations or challenges.
- Implementation of measures to reduce emissions and increase efficiency, such as alternative fuels and technologies.
- Reporting system to track and monitor emissions. The system will be supported by dedicated staff in Wallem to ensure full regulatory compliance and proactive action to optimize performance.
- Assistance with obtaining and maintaining necessary permits and certifications, if required.
- Regular communication and updates on changes to EU ETS regulations.
- Integration with existing ship management systems for seamless implementation.
- Customised training and education for Ship Owners and crew members on EU ETS regulations and compliance.
- Assistance with opening of a Marine Operator Holding account, carbon credit trading and offsetting options, if required.
- Owner’s dashboard to monitor GHG emissions and CII rating.
- EU ETS verified reports, CII and IMO DCS verification, EU, and UK zero emission reports at an interval required by the Ship Owner. The reports are provided for a fee by the verifier which will be charged to the vessel’s account.
- Voyage optimization service as an additional service for an additional charge.
- Assessment of the shipowner’s current emissions and potential areas for improvement in the CII rating.
Contact
In case of further queries or comments, please write to the fleet manager in charge of your ships, or to Gavin D’Souza.
Gavin D’Souza
- Technical Director, Ship Management
- Wallem Group
- shipmanagement@wallem.com
This document only represents the general view of Wallem Group Limited and is
not written for or based on the situation of any company. Readers are advised
to take into consideration their own operations and seek independent and
professional advice(s) before referring to any part of this document.
Whilst we have taken care to ensure the quality of this document, we cannot
accept any responsibility in respect of any loss or damage of any kind
whatsoever which may arise from your reliance on this document.
© 2024 Wallem Group Limited. All rights reserved.
www.wallem.com
References
Read User Manual Online (PDF format)
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