Classification society DNV on Tuesday (24 January) released a statutory news article regarding EU’s legislative bodies reaching an agreement on including shipping in its Emission Trading System (EU ETS). The following is an excerpt of the article:

Subject to final adoption, ships above 5000 GT transporting cargo or passengers for commercial purposes in the EU will be required to acquire and surrender emission allowances for their CO2 emissions from 2024. Offshore ships will be included from 2027. This statutory news summarizes the current information on EU ETS.

Relevant for ship owners, managers and charterers.

The European Parliament (EP), Council of the European Union, and the European Commission have reached an agreement on including shipping in the EU’s Emission Trading System (EU ETS) from 2024. There is no consolidated text available yet and this newsletter is based on the available information about the agreement and otherwise the Commission proposal from 14 July 2021. The EP and Council are expected to formally adopt the revised directive later. Further details on the requirements and processes can be expected as the final text is adopted, and the European Commission adopts related implementing and delegated acts.

The EU ETS is an emission cap-and-trade system where a limited amount of emission allowances – the cap – is put on the market and can be traded. The cap is reduced each year, ensuring that the EU’s emission target by 2030 of 55% reduction, relative to 1990, can be met while becoming climate-neutral by 2050.

The EU ETS and EU MRV requirements

Under the EU ETS each company with ships trading in the EU/EEA is required to surrender emission allowances corresponding to a certain amount of its GHG emissions emitted over a calendar year starting with 2024. The requirements apply to the shipping company which is the shipowner or any other organization or person, such as the manager or the bareboat charterer, who has assumed the responsibility for the operation of the ship including duties and responsibilities imposed by the ISM Code. The emissions will be reported and verified through the existing EU MRV (Monitoring, Reporting and Verification) system, which will be revised and extended to cover necessary GHG emissions, ship types and sizes.

Emission scope

Ship types and sizes

From 2024 the EU ETS will include ships above 5000 GT 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 above 5000 GT 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.

Greenhouse gases (GHGs)

From 2024 the EU ETS will include CO2 emissions only, while the EU MRV will be extended the same year to include reporting of methane (CH4) and nitrous oxide (N2O) which are two other greenhouse gases (GHG) emitted by ships. From 2026 the EU ETS will also include these two GHGs.

Voyages

All 100% of emissions on voyages and port calls within the EU/EEA, and 50% of emissions on voyages into or out of the EU/EEA are subject to the EU ETS. To avoid evasive behaviour, container ships stopping in transhipment 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 transhipment port. The EU will provide a list of transhipment ports.

Note: The full DNV statutory news article can be read here. 

 

Photo credit: william william on Unsplash
Published: 31 January, 2023