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No return journey from EU ETS

Photo: METIS Cyberspace Technology Panos Theodossopoulos, CEO, METIS Cyberspace Technology
Panos Theodossopoulos, CEO, METIS Cyberspace Technology
Many expect June’s elections to the EU Parliament to bring a radical shift in the profile of the chamber’s 720 MEPs, which may explain why those in EU power are pushing hard on commitments that will be hard to reverse.

A reshaped parliament will certainly re-evaluate priorities, especially in light of continuing economic conditions and geopolitical turmoil. Some predict elements of the European Green Deal (EGD) as possible casualties. As a January EC briefing document ‘EU Elections: A Guide to Transport 2024-2029’ notes: “The next European Parliament must decide if it is full speed ahead for the Green Deal, or full stop.”

EU shipping emits about 160 million tonnes of CO2 every year, which is about 15% of Europe’s transport CO2 emissions. After a small dip during the COVID-19 pandemic, shipping emissions quickly overtook their pre-pandemic levels in 2022 and are once more on the rise.

Shipping is expected to contribute above 30% to Europe’s transport CO2 by 2050, even taking account of the ‘Fit for 55’ package - which includes the EU Emissions Trading Scheme (ETS) and the FuelEU Maritime law to drive the industry towards sustainable fuels from 2025.

Whether or not incoming MEPs envisage a good rest as their preferred next step for the ‘Fit for 55’ programme, however, entry into force of the EU ETS from 1 January 2024 suggests that at least one part of the decarbonisation ‘journey’ is a voyage of no return.

The EU ETS applies to ships of 5,000 gt and above calling at EU ports, and in its first year requires stakeholders to buy and surrender allowances for 40% of their verified emissions for intra-EU voyages (20% for voyages into or out of the EU). Shipping companies must surrender (use) their first ETS allowances by 30 September 2025 for emissions reported in 2024.

In 2025, this increases to 70% of emissions for intra-EU voyages, reaching 100% from 2026 (50% for voyages into or out of the EU).

In the run up to the June elections, it is reasonable to expect EU institutions to apply special vigour when implementing regulations which have already entered into force.

It is therefore prudent to note that, behind the commonly cited deadlines sits ‘The Union Registry’, whose purpose is to guarantee accurate accounting for all allowances issued under the EU ETS. The registry keeps track of the ownership of allowances held by enterprises with Maritime Operator Holding Accounts (MOHA), whose enrolment must be completed to a more pressing schedule.

Shipping companies registered in an EU Member State are automatically allocated to that state as their Administering Authority within the EU ETS. However, the allocation of other companies to their relevant Member State Administering Authority only took place on 30 January 2024, in a list reporting  name or IMO identification number.

Within 40 working days after 30 January 2024, all parties not registered in an EU State and therefore not automatically allocated to an Administering Authority must identify their allocated Member State Authority and open a MOHA.

METIS Cyberspace Technology’s cloud-based Total Emissions Management solution already allows ship owners and operators to make best use of the EU ETS. Capturing CO2 emissions data and reporting with the per voyage and cumulative accuracy on which the ETS relies, METIS enables users to establish the monetary value of equivalent allowances based on current EU carbon market rates. In addition to determining the number of allowances required, METIS helps owners assign costs to the charterer or ship manager based on the ‘polluter pays’ principle.