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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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China: Chimbusco and BJEC enter green methanol cooperation agreement

Document was signed between Ding Lihai, deputy general manager of Chimbusco, and Li Jianjun, deputy general manager of BJEC.
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July 8, 2025

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Chimbusco x BJEC MT

China Marine Bunker (PetroChina) Co.,Ltd. (Chimbusco) and POWERCHINA Beijing Engineering Corporation Limited (BJEC) on Thursday (3 July) formally entered into a green methanol strategic cooperation framework agreement.

The document was signed between Ding Lihai, deputy general manager of Chimbusco, and Li Jianjun, deputy general manager of BJEC.

BJEC, a subsidiary of China Power Engineering Group, is experienced in the survey, design, construction and technology research and development of large-scale renewable energy projects.

Moving forward, the two parties said they will respectively focus on their core advantages and work together to promote the production, supply, storage and refuelling of green methanol as an energy source to help support the low-carbon transformation of the shipping industry.

Ding Lihai said: “The shipping industry is one of the important sources of global carbon emissions. Promoting low-carbon fuel is the key to the transformation of the industry. As the main force in the supply of bunker fuel, Chimbusco has been committed to expanding its clean fuel supply capacity. The cooperation with BJEC will integrate the advantages of green energy development and fuel supply, accelerate the large-scale application of green methanol, and meet the needs of shipping companies for clean fuel. We look forward to providing effective solutions for the green transformation of the shipping industry through the joint efforts of both parties.”

Li Jianjun said: “Implementing the ‘dual carbon’ goal is an important responsibility of enterprises. BJEC has accumulated strong technical strength in the field of green energy. This cooperation with Chimbusco will focus on the entire industrial chain of green methanol, from raw materials, production to supply, to provide clean and sustainable fuel solutions for the shipping industry. The complementary advantages of both parties will promote the rapid development of the green methanol industry and inject strong impetus into the low-carbon transformation of the shipping industry.”

 

Photo credit: China Marine Bunker (PetroChina) Co.,Ltd.
Published: 8 July 2025

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Towngas and Royal Vopak collaborate to expand green methanol supply chain network

‘Towngas has recently completed a 6,000-tonne green methanol bunkering project, the largest in Asia,” said its Chief Operating Officer – Green Fuel and Chemicals.
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July 8, 2025

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Towngas x Royal Vopak MT

Hong Kong and China Gas Company Limited (Towngas) and Vopak China Management Co., Ltd. (Royal Vopak) on Tuesday (8 July) said both recently signed a strategic framework cooperation agreement to collaborate in areas such as green methanol production, storage, bunkering, and trading etc.

Focusing on the Chinese mainland, Hong Kong, and Asia-Pacific markets, both parties are joining forces to expand an efficient green methanol supply chain network and support the shipping industry’s low-carbon transition.

The two parties will capitalise on their respective strengths to expand the supply network of green methanol.

Towngas employs proprietary technology to convert agricultural and forestry waste as well as scrap tyres into green methanol, and has obtained multiple international certifications and provides a sufficient supply of green methanol for maritime fuel bunkering.

Royal Vopak provides green methanol storage and terminal services with its comprehensive storage and terminal infrastructure and coastal port network advantages.

Together, the two parties will achieve efficient resource allocation and ship green methanol to the Greater Bay Area, East China, South China, and the broader Asia-Pacific markets, further expanding the green methanol supply chain network.

Towngas and Royal Vopak will further develop multiple areas of regional cooperation, including in the Greater Bay Area. By leveraging the strengths of the ports in Hong Kong, Shenzhen, and Guangzhou, the partnership will focus on “production and storage synergy” as its core to strengthen cooperation around logistics and terminal facility construction, and to build an integrated green methanol storage and transportation network.

In East China, the two parties will centre their collaboration in Shanghai and Ningbo, two major international ports, to further strengthen cooperation in logistics storage and bunkering facility construction to meet the growing demand for green fuels at both ports.

In the Bohai Bay region, with Tianjin as the strategic hub, Towngas will transport green methanol produced at its northern China production base to Royal Vopak’s local storage tank farm, then achieve resource allocation through the Royal Vopak’s distribution network, supporting the supply of green methanol from northern China to the national and Asia-Pacific markets.

The two parties will also target key export markets, such as Singapore, Vietnam, Japan, and South Korea, to accelerate overseas expansion and boost the market competitiveness of clean energy in the Asia-Pacific region.

“Towngas has recently completed a 6,000-tonne green methanol bunkering project, the largest in Asia,” said Sham Man-fai, Towngas Chief Operating Officer – Green Fuel and Chemicals.

“It was completed with the support of Royal Vopak’s Tianjin storage tank farm facilities, laying a solid foundation for this partnership.

“Towngas’s Inner Mongolia green methanol plant is set to increase its annual capacity from 100,000 tonnes to 150,000 tonnes by the end of this year, with plans to further expand to 300,000 tonnes by 2028. Together with Royal Vopak’s storage and terminal services infrastructure and coastal port network, the two parties will build a comprehensive green methanol supply chain network.”

 

Photo credit: Hong Kong and China Gas Company Limited
Published: 8 July 2025

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SEKAVIN starts new physical supply operations in the port of Istanbul and Izmit Bay

Operation is supported by three marine refuelling barges; namely Tarabya-E, Beykoz- E, and Kalamis-E.
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July 8, 2025

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SEKAVIN BARGE

Piraeus-based bunkering firm SEKAVIN on Monday (7 July) said it has recently started new physical supply operations in the port of Istanbul and Izmit Bay.

The operation is supported by three marine refuelling barges; namely Tarabya-E, Beykoz- E, and Kalamis-E. The bunkering vessels have successfully completed numerous deliveries to seagoing vessels.

According to SEKAVIN, Istanbul represents one of the world’s most strategic and challenging maritime environments. The country sees more than 43,000 annual Bosphorus passages and delivers roughly 2 million metric tons per year in bunkers to receiving ships.

In a statement to Manifold Times, John Tsogas, Global Head of Bunkering at SEKAVIN, noted his company intends to offer partners “a very reliable and flexible service” covering the Northeast Med with Istanbul.

The development is in combination with the bunkering firm’s current physical operations in Syros port, together with their traditional Piraeus physical operations which have been carried out for almost 50 years.

Related: SEKAVIN and GCL to strengthen marine fuel supply and logistics in key bunkering hubs

 

Photo credit: SEKAVIN
Published: 8 July 2025

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