On 1 January 2024, the EU extended the coverage of its ETS to incorporate the maritime sector, as part of the broader EU ETS reform that came into force in June 2023. The sector represents 3 to 4% of the EU’s total CO2 emissions.
Following this expansion, the EU ETS now includes emissions from large ships departing from and arriving in EU ports, regardless of their flag. Initially, the system applies to vessels transporting goods and passengers with a gross tonnage of 5000 or more. Starting in 2027, the coverage will extend to vessels engaged in offshore activities such as oil and gas exploration or maritime construction, again with a gross tonnage of 5000 or above.
The system covers emissions generated when ships are docked in EU ports and during journeys within the EU, with an additional inclusion of 50% of emissions from trips to or from non-EU countries. The extended system will initially cover CO2 (carbon dioxide) emissions only, with CH4 (methane) and N2O (nitrous oxide) scheduled for inclusion from 2026 onward.
Following the same principle as other EU ETS sectors, shipping companies are required to actively monitor their emissions and acquire and surrender EU allowances (EUAs) for each ton of reported greenhouse gas emissions. This integration builds upon the existing EU Monitoring, Reporting, and Verification system for the maritime sector, established in 2015 as an initial step toward pricing greenhouse gas emissions in this sector.
To ensure a smooth transition, the surrender obligations will be phased in between 2025 and 2027:
2025: firms must surrender EUAs covering 40% of their emissions reported for 2024;
2026: for 70% of their emissions reported for 2025;
2027 onwards: for 100% of their reported emissions in the previous year.
The EU will channel the generated revenues into the Innovation Fund, to support its mission to drive innovation in the maritime sector and accelerate the Union’s decarbonization efforts.
The extension of the EU ETS to the maritime sector is integral to the European Union's comprehensive "Fit for 55" policy package. Adopted on 16 May 2023, these regulations officially came into force on 5 June 2023. They mark a significant milestone for the EU ETS, effectively placing emissions trading at the heart of the EU’s decarbonization agenda.
source: icapcarbonaction.com
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