On 1 January 2024, shipping officially joined the European Union’s Emission Trading System (EU ETS). With it emerged a comprehensive set of responsibilities, accompanied by significant financial implications for shipping companies who, for the first time, are included in a market-based measure such as EU ETS. The increased level of interaction between the European Commission and the shipping industry means a novelty for both parties - and an ongoing learning process.
Published on 18 Apr 2024
To ensure EU ETS compliance, the time is now for shipping companies to get organised and answer questions like: Who is responsible for our ships’ ETS compliance? What Administering Authority are we assigned to? How does the emission reporting work? Do we need to set up a trading account? What is an EU Allowance (EUA)? What is the difference between a trading account and a Maritime Operator Holding Account (MOHA)? When do we need to do what?
While most regulatory requirements have been set, there remain a few scenarios that could benefit from further refinement. “In some cases, the available options allowed by the regulation for assigning ETS responsibility do not align with the duties as contractually agreed between the parties of our complex shipping ecosystem,” says Alexander Senteris, BSM’s Emission Compliance Manager. “They will need to be carefully reconsidered for a sustainable solution moving forward.”
Similar to the work in progress on the regulatory side, more consensus is needed on the commercial front. While charterers have accepted the responsibility to cover their emissions, the mechanism between charterers and owners regarding how to compensate the ETS obligations has not yet fully been agreed. A commonly accepted standard clause has not yet emerged.
In terms of operations, the shipping industry is starting to become accustomed to EU Allowance (EUA) transactions and the exchange of emission data which must now be integrated into commercial agreements. Regarding emission reporting, however, shipping companies must still adapt, as standards and processes in this area have significantly evolved in recent years.
BSM’s support for ship owners and operators encompasses a wide range of services, from standard emissions reporting to in-depth management of the EU ETS obligations on behalf of the owner. This includes providing regulatory consulting, account creation and management, reviewing commercial agreements, trading and EUA custody services.
“We are well underway having started the reporting of the required emission data for voyages affected by the EU ETS directive. Our approach to emission data management is holistic, involving meticulous monitoring, collection and correction,” explains Senteris.
He continues, “We collaborate with accredited verifiers to create validated emission statements and calculate the necessary allowances for compliance.”
Additionally, BSM prepares emission allowances declarations as a trusted source for collecting relevant EUAs from commercial counterparts. “In return,” he adds, “we track receivables of EUAs against emissions exposure to ensure the fulfillment of obligations.”
“Decarbonising the shipping industry has long reached non-debatable status. Regulations like EU ETS or the International Maritime Organization’s (IMO) Carbon Intensity Indicator (CII) rating scheme are only the beginning,” Senteris observes.
The European Commission’s ‘Fit for 55' legislative package holds more regulations such as FuelEU in the pipeline while the IMO explores market-based measures matching the regulatory ambit of the European Union. Proposals have been submitted and are currently undergoing review.
"That is why we keep developing our smart technologies and track and analyse carbon emissions to continuously discern patterns, trends and inefficiencies," summarises Senteris. "In doing so, we not only ensure compliance but also devise decarbonisation strategies aimed at reducing both emissions and costs."
Alexander Senteris
Compliance Manager for Emission Trading Systems
ContactAlexander Senteris
Compliance Manager for Emission Trading Systems
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