EU ETS

Law firm WFW shares EU ETS and FuelEU compliance and exemptions checklists

Watson Farley & Williams’ Nick Walker and Valentina Keys present a guide for shipping companies to navigate through complexities of EU ETS and FuelEU Maritime regulation.

Published

1 month ago

September 4, 2024

Admin

Watson Farley & Williams LLP London Partner Nick Walker and Counsel Valentina Keys on Monday (2 September) published an article to guide shipping companies on the European Emissions Trading Scheme and FuelEU Maritime regulation:

Since 1 January 2024, shipping companies have been subject to the expanded European Emissions Trading Scheme (“EU ETS”), have had to monitor their emissions, open trading accounts (see below) and been tasked with formulating more efficient fuel and route compliance strategies in preparation for the submission of their first reports in March 2025. This briefing and the bespoke compliance and exemptions checklists we have prepared will help guide you through the complexities of the EU ETS and FuelEU Maritime Regulation (“FEMREG”).

EU ETS and MOHAs

Shipping companies will be required to surrender their EU ETS allowances for the first time on 30 September 2025. For an analysis of the commercial and legal implications of EU ETS for shipowners, managers, charterers and other maritime participants see here and here. Against this backdrop, little progress has been made with the opening of Maritime Operator Holding Accounts (“MOHAs”) with only 940 or so MOHAs having been opened by shipping companies thus far¹.

We understand that registries in various member states are struggling to manage the large volumes of applications that have been made. The fact that the EU ETS has only been partially implemented in member states (only a handful have so far implemented the EU ETS Directive 2023/959) does not help and the lack of understanding amongst registry staff of the complexities of the maritime industry stands as perhaps the biggest hindrance to the timely and effective opening of MOHAs.

With this in mind, WFW has both prepared bespoke clauses to be inserted into charterparties, ship management agreements and MOAs and launched its own EU ETS/FEMREG risk management agreement in order to fill in the gaps that the regulations simply do not address (e.g., the EU ETS costs clause and dispute resolution mechanisms).

First Fuel EU deadline

In the meantime, importantly, the first of many compliance deadlines has just passed pursuant to FEMREG. FEMREG poses an even greater challenge due to its technically complex and pernickety nature with shipping companies required to submit their Fuel EU Monitoring Plans by 31st August 2024 (see our insight here). The European Commission has now released the long awaited FuelEU Monitoring Plan Template to assist with the submission (see here).

FAQs

Whilst the European Commission (“EC”) has now published FAQS for both EU ETS and FEMREG, it is important to remember that these are guidelines only and not legally binding. Nor do they delve into the level of detail that many in the industry are seeking. With a view to shedding more light on the missing detail and particularly on the scope and mechanics of both EU ETS and FEMREG, WFW has prepared a compliance toolkit consisting of a compliance deadlines checklist; and a table of exemptions that apply under both EU ETS and FEMREG (which you can download here), as well as bespoke EU ETS and FEMREG clauses and agreements. It is important for shipping companies and their investors to be alive to these deadlines as well as to the exemptions when assessing applicability and preparing their compliance strategies.

Exemptions

The list of potentially available exemptions is far from straightforward. Whilst some apply under both EU ETS and FEMREG, others may only be available under one or the other. WFW’s checklist table covers all the available exemptions and divides them into three categories: (1) vessel size and class; (2) voyage types; and (3) maritime activity and ports of call. It can be particularly daunting to work out what constitutes a “small island” exemption, or that of an “Outermost Region”. Six exemptions are available under (1); ten exemptions are available under (2) and (3). You can view the table of exemptions by downloading our Compliance Toolkit here.

Key Compliance Deadlines

We have also prepared an EU ETS and FEMREG Compliance Deadlines Checklist to assist the industry with their internal planning and budgeting strategies. To access our EU ETS and FEMREG Compliance Deadlines Checklist, download our Compliance Toolkit here.

[1] Full list of MOHAs available here

Photo credit: CHUTTERSNAP from Unsplash
Published: 4 September, 2024

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Port & Regulatory

VPS on new EU regulations: What offshore vessel owners need to know

Firm guides offshore vessel owners on the upcoming EU requirements, including four essential questions every offshore shipowner should ask when preparing for the latest MRV requirements.

Published

1 week ago

September 26, 2024

Admin

Marine fuels testing company VPS on Wednesday (25 September) shared a brief to guide offshore vessel owners on the upcoming EU requirements, including four essential questions every offshore shipowner should ask when preparing for the latest Monitoring, Reporting, and Verification (MRV) requirements:

Executive Summary

The maritime industry is facing significant regulatory changes aimed at reducing greenhouse gas (GHG) emissions. The latest EU regulations, particularly the updated Monitoring, Reporting, and Verification (MRV) requirements, are set to impact offshore vessels starting from January 1, 2025. These regulations mandate comprehensive emissions monitoring and reporting for vessels with a gross tonnage (GT) of 400 and above. Additionally, offshore vessels with a GT of 5,000 or more will be included in the Emissions Trading System (ETS) starting from January 1, 2027. Shipowners must prepare for these changes to ensure compliance and leverage the opportunities for innovation and sustainability.

Key Developments

Updated MRV Requirements:

Starting from January 1, 2025, offshore vessels with a gross tonnage (GT) of 400 and above will be required to comply with the EU MRV regulations. This extension ensures that emissions data from these vessels are accurately reported and verified, providing a reliable basis for future regulatory measures.

Inclusion in the ETS:

Offshore vessels with a GT of 5,000 or more will be included in the EU ETS starting from January 1, 2027. The ETS operates on a “cap and trade” principle, where a limit is set on the total amount of GHG emissions, and companies can trade allowances. This system incentivizes shipowners to reduce their carbon footprint.

Potential Outcomes and Consequences

Compliance and Reporting Requirements:

Shipowners will need to invest in systems and processes to accurately monitor and report emissions as required by the MRV regulations. While this does not directly imply purchasing emission allowances, it involves ensuring accurate data collection and verification, which may require operational adjustments and investments in monitoring technologies.

Increased Costs from ETS:

If offshore vessels are included in the ETS from 2027, shipowners will need to purchase emission allowances, which could increase operational costs. However, these costs can be offset by the economic incentives provided by the ETS, such as the ability to sell surplus credits.

Technological Advancements:

The new regulations will likely drive innovation in the maritime industry. Shipowners will be encouraged to adopt renewable and low-carbon fuels, such as advanced biofuels, e-fuels, hydrogen, and ammonia. These advancements will not only help in meeting regulatory requirements but also position companies as leaders in sustainable shipping.

Enhanced Market Competitiveness:

Compliance with the new regulations can enhance a company’s reputation and competitiveness in the market. Customers and stakeholders are increasingly prioritizing sustainability, and companies that demonstrate a commitment to reducing their environmental impact will likely gain a competitive edge.

4 Key Questions Every Offshore Shipowner Should Ask to Navigate the New MRV Regulations

As the maritime industry faces new regulatory challenges, here are four essential questions every offshore shipowner should ask when preparing for the latest MRV requirements:

Scope & Compliance:

"Do I fully understand how the new MRV regulations apply to my fleet, and what are the key definitions of ‘offshore ships’ and ‘ports of call’ I need to consider?"

Reporting & Verification:

"What specific data do I need to report, and how can I ensure my emissions data is verified accurately?"

Operational Adjustments:

"What changes do I need to implement to comply with MRV standards while minimizing costs?"

Certified Biofuels:

"When should I explore certified biofuels, and how can I ensure they meet sustainability criteria?"

Note: The full article by VPS can be read here.

Photo credit: VPS
Published: 26 September, 2024

EU ETS

OceanOpt and Veracity by DNV partner on maritime emissions management

Vessel emissions verified by DNV’s Emissions Connect can now be transferred into OceanOpt’s EU ETS portal, streamlining allocation and reconciliation of EU Allowances.

Published

1 month ago

September 3, 2024

Admin

Emissions management solutions provider OceanOpt recently announced a strategic partnership with Veracity by DNV, the maritime emissions cloud from classification society DNV.

The collaboration marked a step forward in addressing the complexities of the European Union Emissions Trading System (EU ETS) for shipping companies.

Through an API-backed data flow, vessel emissions verified by DNV’s Emissions Connect can be transferred into OceanOpt’s EU ETS portal, streamlining the allocation and reconciliation of EU Allowances (EUAs).

Anil Jacob, Managing Director of OceanOpt, said: “By connecting OceanOpt to the Veracity cloud we also integrate with DNV’s Emissions Connect, where customers can generate voyage statements for EU ETS.”

“With this at hand, our customers can meet the regulatory requirements in time, as well as comply with various charter party clauses. Our well-defined approach frees our customers from the burdens of data management and empowers them to focus on strategic growth.”

“Further on, OceanOpt’s data management service provides actionable insights for our clients to be able to significantly reduce carbon tax costs while ensuring regulatory compliance.”

Helge Bartels, COO, Bernhard Schulte, said: “OceanOpt provides the Berhard Schulte fleet with a customer-specific service package covering all IMO DCS and EU MRV reporting requirements.”

“When they now partner with Veracity and integrate with DNV’s Emissions Connect, we gain seamless access to verified emissions data from DNV inside the OceanOpt solution.”

“This provides us with a trusted baseline for our emissions management, aiming at reducing fuel consumption, improvingd CII-ratings, having full transparency and perfect argumentation towards owners, charterers, authorities, and other relevant stakeholders.”

“Not to the least, the tools for CII, EU ETS & Fuel EU help to identify necessary trade changes and related improvements.”

Mikkel Skou, Executive Director, Veracity by DNV, said: “We are pleased to welcome OceanOpt to Veracity by DNV’s network of integrated solution partners.”

“Their efforts to deliver timely and good quality data management for the Bernhard Schulte fleet is especially noteworthy, and we look forward to working with OceanOpt in helping our common customers obtain, manage and maximize the use of verified emissions data.”

Photo credit: Venti Views on Unsplash
Published: 3 September, 2024

Decarbonisation

INTERTANKO and Veracity by DNV partner on emissions data sharing

Partnership will enable DNV emissions verification customers to seamlessly share their data with INTERTANKO, further supporting the tanker industry in its decarbonization efforts.

Published

2 months ago

August 20, 2024

Admin

INTERTANKO and Veracity by DNV partner on emissions data sharing

Veracity by DNV and INTERTANKO on Monday (19 August) announced their partnership, enabling DNV emissions verification customers to seamlessly share their data with INTERTANKO, further supporting the tanker industry in its decarbonization efforts.

The partnership between Veracity by DNV and INTERTANKO represents an advancement in the use of verified emissions data by making it easier for tanker operators to share emissions data directly with external stakeholders, reducing their administrative workload.

2024 is the first year where ships trading in the European Union are subject to its Emissions Trading Scheme (ETS).

Verified emissions data are increasingly important for EU ETS commercial settlement, Carbon Intensity Indicator (CII) implementation, and operational efficiency requiring real-time verification of emissions data. Integration with INTERTANKO's benchmarking tool allows members using DNV as their verifier, to share the verified data in one secure and automatic data stream.

Mikkel Skou, Executive Director of Veracity by DNV, said: "Verified emissions data is becoming increasingly crucial for commercial settlements.”

“Now, we’re delighted to see that industry benchmarks and models like INTERTANKO’s can benefit from increased accuracy and trust from verified emissions data.”

“With our Veracity integrated partners, like INTERTANKO, we have prebuilt plug-and-play secure data integration ready for our customers to use. No IT project is needed for customers to automate their operation.”

Catrine Vestereng, SVP & Global Segment Director at DNV, said: "DNV is striving to support our tanker customers in their daily challenges, and by working closely with INTERTANKO within all technical, regulatory, and safety issues.”

“One of the greatest challenges in the tanker industry these days is seamlessly being able to share emission data with external stakeholders, and we are proud to be able to set up this connection with INTERTANKO to reduce the administrative burden for our tanker customers."

Tim Wilkins, Deputy Managing Director at INTERTANKO, said: "The newly formed partnership enables DNV emissions verification customers to share their verified data with INTERTANKO easily and supports the development of a platform for our members to simplify reporting and eliminate the need for multiple reports to several different entities.”

“The collaboration enhances INTERTANKO’s data analytics tools allowing Members to compare their fleet with the industry or internally across various parameters such as CII, annual efficiency ratio and fuel consumption.”

Photo credit: DNV
Published: 20 August, 2024