The European Union (EU) is poised to broaden the reach and applicability of the EU Emission Trading System (ETS), an initiative that was originally established in 2005. This expansion will encompass the inclusion of the shipping industry within the ETS framework. This move is driven by the EU’s unwavering commitment to achieving a resolute state of net-zero emissions by the year 2050.

The expansion to shipping lines and ship operators will mean they will begin paying for carbon emissions from 1^st January 2024. Despite its carbon footprint, it’s important to note that shipping still stands out as the most ecologically responsible choice among various transportation methods.

ETS is a “cap and trade” scheme whereby a limit (the cap) on the total amount of greenhouse gas emissions that can be emitted by factories, power plants, ships and other entities included in the scheme. The emission obligation requires companies to hold an allowance for each tonne of CO2 and other GHGs being emitted. Proceeds from the sale of allowances will be used for the EU’s green fund which will support investments in alternative fuels and new technologies.

The change will mean the ETS will significantly impact the cost base for the industry due to shipping companies being required to purchase emission allowances from the EU. Additional costs will need to be absorbed by the market, and due to no fixed price for the emission allowances, the price will be determined by supply and demand in the market.

To support the 2050 goal of net-zero emissions, there will be greater pressure on shipping companies to accelerate their efforts to reduce their environmental footprint.

The UK has also announced its intention to introduce a similar system which will affect both UK domestic routes and UK-EU routes in the future.

Find an overview of the ETS below:

• Start date of 1st January 2024
• All vessels over 5,000 gross tonnage trading within EU waters will have to apply, irrespective of flag
• A phased-in implementation, with 40% of emissions covered by the scheme during 2024, 70% for 2025 and 100% for 2026.
• All intra-EU voyage emissions to be covered by the scheme
• 50% of EU in-bound/out-bound voyage emissions will be covered
• 100% of emissions that occur between two EU ports and when ships are within EU ports
• The ‘shipping company’ (define as owner, manager or bareboat charterer) will be responsible for surrendering the allowances
• The system will cover carbon dioxide from 2024, followed by methane and nitrous oxide from 2026
• Non-compliance can lead to penalties and expulsion orders

Uniserve will be in touch with customers regarding the effects of these ETS changes and details surrounding the additional surcharges.

For further information on our ocean freight services contact our Customer Relationship Management team by calling 01375 856060 or emailing crmteam@ugroup.co.uk.