On April 18th, 2023, the European Council approved the final text for including maritime transport in the European emissions trading system, EU ETS, which has been in force since January 2024. As of its implementation, the ETS has extended to cover CO2 emissions from all large ships (5,000 gross tonnage and above) entering EU ports.
Throughout 2024, shipping companies were required to monitor their emissions under the new regulations. Emissions from the 2024 reporting year must be verified by March 31st, 2025, and companies are required to surrender allowances covering 40% of those verified emissions by September 30th, 2025. The scheme covers 50 percent of emissions from trips that begin or end outside the European Union and 100 percent of emissions that occur within the Union. Emissions from shipping are included in the overall ETS cap, and, like the other sectors in the scheme, shipping companies must purchase and surrender allowances for every ton of CO2 equivalent emissions reported.
Algorithm Assigns Shipping Companies to Member States
On January 30th, 2024, the Commission issued Implementing Decision 2024/411 on the list of shipping companies, specifying the administrative authority concerning the shipping company under Directive 2003/87/EC of the European Parliament and of the Council.
As stated in the Decision, for the creation of this list, the European Maritime Safety Agency developed an algorithm that assigns each shipping company to a member state, according to the rules laid down in Article 3 of Directive 2003/87/EC and Articles 4 and 5 of Implementing Regulation (EU) 2023/2599. The algorithm was applied on November 20th, 2023, based on the information available on that date in the Union Maritime Information and Exchange System, called Thetis MRV.
To facilitate the identification of shipping companies, the list includes, if available, the unique company and fleet owner identification number defined by the IMO. To ensure data consistency in terms of format, the few numbers recorded by entities not included in the IMO are left blank. The ETS is moving toward a future of phasing out free allocation, and this strategy also applies to the maritime sector.
Phase-out of Free Allowances for Shipping Companies
For large merchant and passenger ships over 5,000 gross tons, the requirement to surrender purchased emission allowances is being phased in over three years, rather than receiving free allocations.
Different Cases for Determining Administrative Authority
Noteworthy is the question of the administrative attribution authority for a shipping company. The country of registration will serve as the main attribution criterion, considering the IMO’s unique identification system. Suppose the administration is not registered in the EU. In that case, the shipping company will be attributed based on the port calls entered into the European Union’s maritime information system, Thetis MRV. It will be given to the member state where the shipping company has made the most frequent port calls in the last four years.
Different cases are now listed.
For shipping companies registered in a third country that has not voyaged to or from the EU in the past two years, the managing authority will become the member state from which the shipping company concluded its initial voyage. In the case of a shipping company’s transition from one administrative authority to another, the new authority will become the Member State where the initial call was made. The newly appointed administration will have access to all information related to the previous one.
Penalties are foreseen if the shipping company does not comply with its obligations, which are 100 €/ton, and a ship expulsion order could be issued.