Guidance for timely compliance with the EU ETS Directive requirements

The American Bureau of Shipping has published the Regulatory News providing the necessary guidance to shipping companies for timely compliance with the EU ETS Directive requirements.

Key Notes

Applicable Vessel Types:

• Ships covered by Regulation (EU) 2015/757, above 5000 GT with voyages in EU ports as of 1 January 2024

References:

• Directive 2003/87/EC
• Directive (EU) 2023/959
• Regulation (EU) 2015/757
• Regulation (EU) 2023/957

Introduction

The revision of the EU ETS Directive entered into force on 5 June 2023. Implementation for the maritime industry will begin on:

• 1 January 2024, for cargo and passenger ships of 5000 GT and above; and
• 1 January 2027, for offshore ships of 5000 GT and above.

To facilitate compliance with the new directive, this Regulatory News is intended to provide operators and shipping companies with the necessary guidance.

Amendments to Regulation (EU) 2015/757 – EU MRV

The extension of EU ETS Directive to maritime transport requires additional reporting requirements.

This was facilitated by Regulation (EU) 2023/957, amending Regulation (EU) 2015/757 which was published in the European Journal on 10 May 2023.

The ABS Regulatory News 10/2023 explains the amendments to the EU MRV Regulation.

Monitoring

• By 1 October 2023, the European Commission (EC) shall adopt delegated acts for the inclusion of CH4 and N2O emissions and the greenhouse gas (GHG) emissions from offshore ships.
• Additional delegated acts shall be adopted for the monitoring and reporting of the aggregated emissions data at company level and the submission to the administering authority.
• By 31 December 2023 or the soonest possible before 1 April 2024, shipping companies should submit to ABS through the THETIS-MRV platform the updated monitoring plans (MPs) according to the EC delegated and implementing acts for each of their ships.
• By 1 April 2024, shipping companies shall for each of their ships submit to their responsible administering authority an MP that has been assessed by the verifier.
• By 6 June 2025, the responsible administering authority shall approve the MP based on the assessment of the verifier.

For applicable ships which have not previously been subject to the requirements of Regulation (EU) 2015/757 prior to 1 January 2024, the shipping company will be required to submit an MP to their administering authority within three months of the ship’s first call in a port of an EU member State.

The administering authority shall approve it within four months.

Reporting

• From 1 January 2024, shipping companies shall monitor and report emissions for cargo and passenger ships of 5000 GT and above in accordance with the revised MP.
• From 1 January 2025, companies shall monitor and report emissions for the following additional vessel types:
  • Offshore ships of 5000 GT and above
  • Offshore ships and general cargo ships below 5000 GT but not below 400 GT.
• From 31 March 2025 and each year after, companies shall, for each ship under their responsibility, submit to their administering authority, flag states concerned and the European Commission, an emissions report for the entire monitoring period of the previous year which has been verified as satisfactory by their verifier. For the monitoring period of 2023, the deadline for submission of the emissions report remains 30 April 2024.
• From 31 March 2025 and each year after, shipping companies shall submit to their administering authority a verified emissions report at company level (aggregated emissions data under ETS).

Shipping companies must continue reporting their greenhouse gas emissions through the existing THETISMRV platform.

The administering authority may request companies to submit their verified emissions reports and the aggregated emissions data at company level prior to 31st of March, but not earlier than 28th of February of each year.

EU ETS Directive application

The EU Directive 2023/959 (amending Directive 2003/87/EC) will apply:

• From 1 January 2024 to cargo and passenger ships of 5000 GT and above.
• From 1 January 2027 to offshore ships of 5000 GT and above.

Container transhipment ports

By 31 December 2023, the European Commission shall establish a list of container transhipment ports by means of implementing acts.

Stops of containerships in neighboring container transhipment ports are not considered a port of call for the purpose of minimizing the risk of evasive behavior.

Responsible entity for compliance with the EU ETS

The person or organization responsible for the compliance with the EU ETS shall be the shipping company, defined as the shipowner or any other organization or person, such as the manager or the bareboat charterer, that has assumed the responsibility for the operation of the ship from the shipowner.

The manager shall provide the administering authority with a document clearly indicating that it has been duly mandated by the shipowner to comply with the ETS obligations.

The document shall be signed by both the shipowner and the manager while an EC Implementing Regulation will define the information to be included in the document.

Nevertheless, provisions are included, pursuant to a contractual arrangement, for transfer of the EU ETS costs from the shipping company to another entity which has the ultimate responsibility for the purchase of the fuel, or the operation of the ship, or both.

‘Operation of the ship’ means determining the cargo carried or the route and the speed of the ship.

The shipping company shall remain the entity responsible for surrendering allowances and for overall compliance while member States shall take the necessary measures to ensure that when the ultimate responsibility for the purchase of the fuel, or the operation of the ship, or both, is assumed by an entity other than the shipping company pursuant to a contractual arrangement, the shipping company is entitled to reimbursement from that entity for the costs arising from the surrender of allowances.

Emissions allowances auctions - Union Registry

Emission allowances can be purchased in the primary market through auctions on the European Energy Exchange (EEX) platform or in the secondary market in which allowances can be sold bilaterally or through various derivatives provided by financial institutions.

Shipping companies may already start buying EU allowances by opening accounts in the Union Registry.

According to the provisions of the Union Registry Regulation, shipping companies shall request the opening of a trading account or a maritime operator holding account.

The latter option shall be available after 1 January 2024.

The maritime operator holding account will be necessary for all shipping companies covered by EU ETS. Through the maritime operator holding account, it will be possible to transfer and surrender allowances.

Trading accounts allow entities to trade on the EU ETS market.

Surrendering of allowances

Starting from 2025, shipping companies shall surrender by 30 September of each year, EUAs corresponding to their verified GHG emissions of the previous monitoring year.

There will be a gradual phase-in of the required allowances to be submitted.

• By 30 September 2025, surrender of EUAs corresponding to 40% of 2024 verified CO2 emissions.
• By 30 September 2026, surrender of EUAs corresponding to 70% of 2025 verified CO2 emissions.
• By 30 September 2027, surrender of EUAs corresponding to 100% of 2026 verified CO2, CH4 and N2O emissions.

Shipping companies will need to surrender allowances to the EU member State which corresponds to their administering authority.

The allowances will need to be submitted through the Maritime Operator Holding Account for that EU Member State.

Emissions offsetting

Carbon credit certificates or other mechanisms cannot be used for EU ETS compliance purposes.

Shipping companies will need to surrender (use) EU allowances corresponding to the amount of aggregated emissions data at the company level.

Administering authority

The administering authority for a shipping company:

• registered in a member State, will be the administering authority of that member State in which the shipping company is registered.
• registered in a third country, will be the administering authority of the member State with the greatest estimated number of port calls from voyages performed by the shipping company in the last four monitoring years. In case of no EU MRV voyages in the preceding four monitoring years, then it will be the member State or the port where a ship of the shipping company has arrived or started its first voyage for the first time.

Before 1 February 2024, the EC shall establish a list of shipping companies that performed a maritime activity that fell within the scope of EU MRV in the previous years, specifying the administering authority for each shipping company.

If you need more information, please visit the ABS Regulatory News page, where the document is available FOR FREE.

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