While maritime transport is one of the most energy-efficient modes of transport and plays a vital role in the economy of the European Union (EU), it remains a growing source of emissions. The EU Emission Trading System (EU ETS) has been extended to maritime sector, incentivizing shipping companies to adopt greener practices and improve environmental performance.
What is EU ETS?​
The EU ETS is a regulatory framework aimed at reducing greenhouse gas (GHG) emissions to promote sustainability across various industries. This means shipowners and operators must surrender allowances based on their emissions which are monitored and reported according to MRV Regulation.
The EU ETS represents a significant shift in how the shipping industry manages data. EU ETS demands daily accuracy to ensure precise emissionsmonitoring and reporting. This can seem comprehensive, but a digital solution like SERTICA VRS minimizes the administrative burden and ensures you get the exact data you require.
How does the EU ETS work?
The EU ETS is a cap-and-trade system established by the European Union to regulate greenhouse gas emissions and its extension to the maritime transport is part of the basket of measures adopted at EU level to achieve the GHG emission reduction target of 55% in 2030 compared to 1990 levels. The cap sets a limit on the total amount of GHG emissions that can be emitted by industries within its scope.
Companies must monitor and report emissions annually and surrender allowances to cover their emissions:
- 40% of the total amount of CO2 emissions for 2024
- 70% of the total amount of CO2 emissions for 2024
- 100% of the total amount of GHG emissions – including not only CO2 but also the other two GHG gases (i.e. CH4 and N2O) from 2026
Non-compliance leads to heavy fines, and the company remains responsible for surrendering the required allowances.
EU ETS extends to shipping from 2024
As of January 1, 2024, the ETS covers shipping activities within the European Economic Area (EEA), consisting of EU member states, Iceland, Liechtenstein, and Norway. Under the revised EU ETS directive, shipping companies must monitor, report and surrender allowances for the amount of COâ‚‚ emitted according to the phase in period (i.e. 40% for 2024, 70% for 2025 and 100% for 2026). From January 1, 2026, the system will also include methane (CHâ‚„) and nitrous oxide (Nâ‚‚O) emissions.
The EU ETS covers:
- 100% of emissions from voyages between EU/EEA ports and emissions occurring within EU/EEA ports.
- 50% of emissions from voyages starting or ending outside the EU/EEA, allowing third countries to determine how to regulate the remaining emissions.
How do shipping companies register and report within the EU ETS?
Shipping companies falling under the EU ETS scope must register with the administering authority, which is the EU/EEA Member State where the company is registeredor, otherwise, the EU/EEA Member State with the highest port calls in the preceding 4 years.
From 2025 onwards, these companies must submit verified emissions data aggregated at the company level for each reporting period and surrender the required allowances by September 30 of each year.
To ease the transition, shipping companies only need to surrender allowances for a portion of their emissions at first:
- 2025: 40% of CO2 emissions reported in 2024
- 2026: 70% of CO2 emissions reported in 2025
- 2027 onwards: 100% of GHG emissions reported in 2026 and onwards
The first surrender deadline for emissions from January 1 to December 31, 2024, is September 30, 2025.
How does the EU ETS affect the maritime sector?
As of January 2024, the EU ETS extends its applicability to ships of 5,000 gross tonnage (GT) and above. This includes both EU-flagged and non-EU-flagged vessels calling at EU/EEA ports.
To comply with the requirements of the EU ETS, accurate emissions monitoring is essential. The EU ETS report is already set up in SERTICA VRS and ready for you to start entering data. This streamlines data collection, enhances reporting accuracy, and ensures compliance.
What are the EU ETS derogations?
While voyages calling at EU/EEA ports fall within the scope of EU ETS, certain routes benefit from derogations until 31 December 2030, such as:
- voyages performed by passenger ships, other than cruise, between ports of EU islands with limited connectivity and with a population of fewer than 200.000 permanent residents and ports of the same Member State
- voyages performed according to transnational public service contracts
- voyages between and to/from ports of the EU outermost regions and from/to the same Member State
Derogations apply to IA, IA Super, or equivalent ice-class ships until December 31, 2030, and to emissions captured and used in products that prevent atmospheric release, excluding them from surrender obligations.
Penalties and cost transfers in EU ETS non-compliance
While shipping companies remain responsible for compliance, entities assuming ultimate responsibility for fuel purchase or ship operation, such as charters, may reimburse the company for the costs associated with allowance surrender.
Failure to surrender sufficient allowances by the deadline incurs penalties of €100 per metric ton of emitted CO2. However, on top of the penalty, the companies still must purchase the emission allowances that they are required to have. Prolonged non-compliance may result in ships being denied entry to EU ports.
With SERTICA VRS, you ensure accurate reporting in a Vessel Reporting System that meets the requirements of the EU ETS. This simplifies data management, eliminates input errors, and missing data – helping you avoid costly penalties.
