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GARD: The EU Emission Trading System – are you ready?

Since the EU ETS has been agreed, vessel owners and charterers that may trade within the EU should ensure they are prepared to comply with its requirements in 2024.

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GARD The EU Emission Trading System

Maritime protection and indemnity (P&I) club Gard on Wednesday (7 December) published an article discussing on the EU Emission Trading Scheme. The following is an excerpt of the article:

There has been increasing interest in expanding existing domestic emission trading schemes to also cover international shipping. There is now agreement in the EU on how the EU’s emission trading system will be applied to shipping from 2024. Owners and charterers should start to think about how they are going to deal with its requirements.

On a nation state level, governments can impose taxes on the sources of pollution at the point of production or sale. An example is petrol, with the aim that the taxes generated will cover the cost of dealing with the resulting pollution and incentivise reduced consumption. The difficulty in international shipping is that if just a few governments took this approach for bunker fuel, the buyers would likely adjust their arrangements so that they avoided bunkering at the taxed ports. Therefore, for a sales tax on bunker fuel to be effective, governments of all the major bunkering ports around the world would need to coordinate and agree to tax bunker fuel in the same way. With such cooperation looking very unlikely in the near term, and IMO discussion of a carbon tax still in its early stages, governments are now looking at imposing costs on emissions, rather than on fuel at the point of sale.

An emission trading scheme (ETS) is a tool that governments and regulators are expected to use increasingly often in the fight to reduce the pollution created by international shipping. The central idea behind an ETS is to have a market mechanism to ensure that “the polluter pays” – the payment being for the environmental and social cost of pollution, its clean-up cost and potentially also research into technology that will reduce or remove it. Of course, increasing the cost of pollution also creates an incentive to generate less of it.

For this reason, there has been growing interest in expanding existing emission trading schemes to include international shipping, including in the EU, China and Japan. The basic idea of an ETS is that a capped number of emission permits are bought and sold on the market, with emitters having to purchase and surrender enough allowances to cover their emissions. The price of the allowances will change over time to reflect the balance of supply and demand, and emitters then are incentivised to find the cheapest (ie. most efficient) ways to reduce emissions.

The EU Emission Trading Scheme 

Launched in 2005, the EU’s Emission Trading System works as a “cap and trade” scheme where emitters of CO2 in certain sectors have to purchase allowances to cover their carbon emissions during the relevant trading period. The number of allowances at any one time are fixed, but they generally reduce each year, so that emissions within the EU also fall.

How the scheme will be applied to shipping has beenunder discussion for some time, but there now seems to be agreement between the European Parliament, the Council of Ministers and the European Commission thatthe key features will be:

  • Application to all vessels over 5,000 GT trading within EU waters, irrespective of flag
  • Start date of 1 January 2024 (pushed back from 1 January 2023)
  • A phased-in implementation, with 40% of emissions covered by the system 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
  • The ‘shipping company’ (defined as owner, manager or bareboat charterer) will be responsible for surrendering the allowances
  • The system will cover carbon dioxide, methane and nitrous oxide
  • 30 April deadline for surrender of allowances for the previous calendar year -for example, 30 April 2025 deadline for 2024 emissions
  • Non-compliance can lead to penalties and expulsion orders

Several parts of the scheme are still unclear, and questions have been raised about two particular areas relating to shipping. First, in the Special Rapporteur’s report of 24 January 2022, it says that where a ship is on charter and the owner is not responsible for purchasing fuel or making decisions about the vessel’s speed, cargo or route, then:

“… a binding clause should be included in such arrangements for the purpose of passing on the costs so that the entity that is ultimately responsible for the decisions affecting the CO2 emissions of the ship is held accountable for covering the compliance costs paid by the shipping company under this Directive.”

Whilst many vessel owners would support the motivation behind this provision, it is far from clear how EU law would impose such a clause in private contractual arrangements between parties that may not be based in EU states. What happens if the charterparty contains no such clause? Could the owners rely on EU law to seek recovery from the charterers in the EU even if there was no such clause in the charterparty? Might it result in some voyage-charterers being forced to pay for EU ETS allowances even though they did not supply the fuel?

A second area of discussion is how emissions on voyages into or out of the EU are to be determined, and if operators may seek to evade the full application of the EU ETS. For example, if a vessel calls at an intermediate port just outside of the EU shortly after leaving EU waters, that may result in the out-bound voyage being assessed as much shorter than one from/to the actual next load port. The change of routing may cause the operator extra costs, but the benefit of the avoided allowances could be greater, depending on the assumptions made. We would expect this issue to be covered by the scheme once implemented, but at the moment it is an area that needs more thought.

Note: The complete article of ‘The EU Emission Trading System - are you ready?’ by Gard can be found here

 

Photo credit: Gard
Published: 8 December, 2022

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Methanol

SMW 2025: MPA seeks methanol bunker supplier licence applications in Singapore

MPA is launching an open call for applications for methanol bunker supplier licences in the Port of Singapore to implement an end-to-end methanol supply model, says Senior Minister Amy Khor.

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MPA issues EOI seeking for methanol bunker fuel suppliers in Singapore

The Maritime and Port Authority of Singapore (MPA) is launching an open call for applications for methanol bunker supplier licences in the Port of Singapore, said Senior Minister of State for Transport Amy Khor on Tuesday (25 March). 

The initiative is part of Singapore’s effort to foster a competitive and innovative ecosystem to accelerate the adoption of low- or zero-carbon fuels, while collaborating with industry stakeholders to ensure their safe and effective deployment.

“To meet growing interest in methanol among shipowners, MPA is launching an open call for applications for methanol bunker supplier licences in the Port of Singapore to implement an end-to-end methanol supply model,” Khor said in her speech at the Accelerating Digitalisation and Decarbonisation Conference, as part of the Singapore Maritime Week (SMW 2025).

“This will build on the recently published Technical Reference for Methanol Bunkering, and the Standards for the Port Limit Methanol Bunker Tankers, to provide a consistent approach to ensure the safe and efficient use of methanol.”

During SMW 2024, MPA announced its regulatory framework for methanol bunkering licence was close to be finalised and would call for applications for a licence to supply methanol as a marine fuel in Singapore. 

In 2023, MPA issued an Expression of Interest (EOI) inviting parties interested in supplying methanol as a bunker fuel in the Port of Singapore. The EOI aims to gather proposals for the implementation of end-to-end methanol bunkering solutions in Singapore from 2025.

Khor also said MPA has also been collaborating closely with industry partners and the A*STAR Institute of High-Performance Computing to conduct virtual simulations of ammonia bunkering operations. 

“These simulations are critical for evaluating and mitigating the environmental and safety risks associated with ammonia bunkering operations. This methodology is also extended to other fuels such as LNG and methanol,” she said. 

In parallel, Singaporean companies such as Seatrium and PSA are exploring initiatives aimed at harnessing and utilising low-carbon energy fuels for the maritime sector.

Related: Singapore releases new standard on methanol bunkering, gears up for multi-fuel future
Related: SMW 2024: MPA receives 50 submissions for EOI to supply methanol bunker fuel in Singapore
Related: MPA issues EOI seeking for methanol bunker fuel suppliers in Singapore

 

Photo credit: Maritime and Port Authority of Singapore
Published: 25 March, 2025

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Alternative Fuels

SMW 2025: Singapore publishes new technical reference for charging electric harbour craft

New Technical Reference establishes the specifications and safety requirements for electric harbour craft charging and battery swap systems to support Maritime Singapore’s decarbonisation goals.

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RESIZED MPA stock photo, Singapore flag

The Maritime and Port Authority of Singapore (MPA) and Enterprise Singapore (EnterpriseSG), through the Singapore Standards Council (SSC), on Tuesday (25 March) have published Technical Reference (TR) 1361 to guide the development of charging infrastructure and battery swap systems for electric harbour craft (e-HC). 

This initiative supports Singapore’s efforts to decarbonise the domestic maritime sector.

TR 136 establishes the safety requirements for the e-HC charging infrastructure and battery swap systems. It includes measures to protect personnel and property from electrical and mechanical hazards during the installation and operation of the charging systems. The TR also establishes the technical requirements to promote interoperability.

TR 136 incorporates widely adopted industry standards on electric vehicle charging systems, such as the Combined Charging System. It is also aligned with local electricity supply conditions and codes such as the TR 25 Electric Vehicles Charging System, as well as international standards including the IEC 61851 on electric vehicle charging system and IEC 62840 on electric vehicle battery swap system. This ensures that service providers can readily adopt the standard.

Adopting TR 136 will strengthen users’ confidence in e-HC charging and battery swap system providers, while giving ship owners, port operators, and charger operators greater assurance in the safe operation of e-HCs. The adoption of the TR is expected to have positive spillover effects with new business opportunities in areas such as charging systems and battery technologies, and upskilling prospects for the maritime workforce.

TR 136 was developed by the Working Group (WG) on Electric Harbour Crafts Charging System, which was appointed by the Electrical and Electronic Standards Committee (EESC) under the purview of the SSC. This WG comprises government and industry stakeholders such as MPA, charging equipment and battery suppliers, e-HC manufacturers and operators, testing, inspection and certification organisations, academic experts, and institutes of higher learning. Please refer to Annex A for the list of stakeholders in the WG.

Mr Teo Eng Dih, Chief Executive, MPA, said: “TR 136 is a critical step towards developing a safe, robust, and interoperable charging infrastructure for electric harbour craft in Singapore. By setting clear safety and operational guidelines, the new standard will give industry players greater confidence in electrification and pave the way for wider e-HC adoption.”

Ms Choy Sauw Kook, Director-General (Quality & Excellence), EnterpriseSG, said: “Standards have always played an important role in enabling pathfinders to drive industry development. By providing local operators with clear guidelines on how to adopt electric charging infrastructure in a safe and reliable manner, the TR 136 will accelerate the electrification of harbour craft and, in turn, the decarbonisation of the maritime sector in Singapore. Enterprise Singapore will continue to work closely with MPA and various industry partners, to develop standards that advance the interests of the maritime industry."

Er. Lim Say Leong, Co-Convenor of the Working Group on Electric Harbour Crafts Charging System, said: “During the development of TR 136, the working group consulted widely with marine industry players as there were no international standards that could be adopted. These efforts were necessary and important to ensure that TR 136 is robust and implementable by key stakeholders in the electric harbour craft ecosystem.”

Mr Ng Bingrong, Co-Convenor of the Working Group on Electric Harbour Crafts Charging System, said: “We thank all partners who have contributed to the TR 136, and will continue to work with all relevant stakeholders to ensure the TR 136 evolves with technology and industry needs. The working group welcomes feedback from users to further improve TR 136.”

MPA and EnterpriseSG will organise a closed-door seminar on 28 March 2025 at the sidelines of Singapore Maritime Week 2025. Key representatives from MPA, the WG, and industry will present their insights and expertise through technical sharing and a panel discussion at the seminar.

As part of the broader effort to encourage adoption of e-HCs, MPA organised a socialisation event on 10 March 2025 to facilitate business matching between the wider group of potential e-HC operators, developers, charging infrastructure providers, financiers, and insurers. The event provided a platform for stakeholders to better understand the technical aspects, cost of ownership, and business model considerations associated with e-HCs.

Financing for e-HCs is available under the Enterprise Financing Scheme-Green (EFSGreen), which enables companies to better access green financing that allows them to develop their capabilities and establish a strong sustainability record. As part of this, EnterpriseSG provides risk-sharing of up to 70% to catalyse lending by seven participating financial institutions. Additionally, local banks DBS, OCBC, and UOB, through engagements with MPA, have expressed strong interest to offer financing solutions for e-HC operators and owners.

Related: SMW 2025: Singapore to launch new standard for electric harbour craft this week

 

Photo credit: Maritime and Port Authority of Singapore
Published: 25 March, 2025

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Alternative Fuels

SMW 2025: Rotterdam, Singapore plan to conduct more bunkering trials of alternative fuels

MPA and Port of Rotterdam inked a deal to strengthen their efforts on Rotterdam-Singapore Green and Digital Shipping Corridor, which includes boosting uptake of low- and zero-emission marine fuels.

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Singapore-Rotterdam Green and Digital Shipping Corridor partners to implement first-mover pilot projects

The Maritime and Port Authority of Singapore (MPA) and the Port of Rotterdam on Tuesday (25 March) said they have signed a Cooperation Agreement to further strengthen their efforts on the Rotterdam-Singapore Green and Digital Shipping Corridor

This follows the success of the corridor as a driving force of maritime decarbonisation and digitalisation since its inception in 2022.

The two ports have since brought together 28 partners across the entire container shipping value chain to drive the deployment of sustainable fuels on the 15,000-kilometer shipping route and implement digital solutions for improved efficiency. 

The collective ambition is to reduce greenhouse gas emissions of large container vessels on the corridor by 20-30% by 2030, while accelerating the adoption of global standards and solutions to facilitate efficient port calls, flow of goods, and enable paperless handling.

To support the decarbonisation of shipping, the collaboration focused on testing and accelerating the adoption of sustainable fuels, with the aim of making them available, accepted and affordable for large-scale use. Emphasis will be on bio- and e-variants of ammonia, methanol, and methane, with working groups established for each fuel type.

Since 2022, several first-mover pilot projects have been carried out, including the first successful bunkering of mass-balanced liquefied bio-methane at the Port of Rotterdam. A similar trial is planned in Singapore in 2025. 

Other achievements include the completion of a Life Cycle greenhouse gas Assessment (LCA) of green ammonia as a marine fuel, and strong support for the development and implementation of the Port Readiness Framework of the International Association of Ports and Harbors (IAPH), which helps ports assess their preparedness to supply sustainable marine fuels.

In the next phase, the partners plan to conduct further studies and trials for the bunkering of bio-methane, methanol and ammonia to support their future use along the shipping corridor. They also aim to develop and mobilise financial instruments to address the cost barriers associated with using low- and near-zero emission fuels.

On the digital front, the two ports have successfully trialled the exchange of port-toport data to exchange vessel arrival and departure timestamps. In support of digital initiatives  by the IMO, this effort aims to optimise vessel arrival planning and port operations between Singapore and Rotterdam. 

Both ports have also established ship-to-shore data exchange infrastructure to enable efficient and secure submission of port clearance information. This saves time and minimises data entry errors through automated data filling. The first phase to trial the use of global standards and digital solutions began in March 2025, with an enhanced solution scheduled for testing in the second half of 2025.

Both government and industry partners are at Singapore Maritime Week to advance the discussions and work on realising the goals of the Green and Digital Shipping Corridor.

Mr Teo Eng Dih, Chief Executive of MPA, said, “The continued progress through the Singapore-Rotterdam Green and Digital Shipping Corridor is testament to the role of public private collaboration to bring decarbonisation and digitalisation initiatives from ideas to implementation.”

“We look forward to collaborating with more partners to bring impact to one of the world’s busiest shipping routes and accelerate the decarbonisation and digitalisation of the shipping industry.”

Mr Boudewijn Siemons, CEO of the Port of Rotterdam, said, “By bringing together parties across the entire value chain, the Rotterdam-Singapore Green & Digital Shipping Corridor has helped to make first, valuable steps towards the decarbonisation of international shipping while also improving efficiency of trade and setting new industry standards.”

“At the same time, we still have a lot of work ahead of us and we are looking forward to continue our work on this together with the Maritime and Port Authority of Singapore.”

Related: SMW 2024: Singapore-Rotterdam Green and Digital Shipping Corridor partners to implement first-mover pilot projects

 

Photo credit: Maritime and Port Authority of Singapore
Published: 25 March, 2025

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