Emission for shipping: costs and consequences!

It will not have gone unnoticed, the EU ETS rules for reducing CO2 emission in shipping which will be implemented as of January 1st 2024. It’s less than 6 months away and will have consequences.  

Every ton of CO2 a ship of 5,000GT and bigger emits, the ship-owner has to keep records and will have to present the reports by latest April 2025, the figures over the year 2024 (this is the working in a nutshell, the formula takes more space). The CO2 emission is covered by allowances with the goal to bring down emissions. The allowances can be covered by certificates. Certificates to cover the allowances are to be purchased. This is can turn out to be a challenge. There is an European auction at EEX where certificates can be purchased but for which a party has to be registered and guarantees to be provided (against big money). Alternatively one will come to the secondary market where certificate holders sell their certificates. You may appreciate that this is a matter of demand and supply! Either way, it will affect everyone who transport their goods by ships. Especially when the cargoes are transported inter-Europe, then the emission calculation is 100% applicable (if calling to/from ports outside Europe, it can be for instance 50% only). The ship-owner at first will be responsible for the emission recording, the calculation and the payment for the allowances. Ultimately, you will appreciate, it will be passed over to the commercial party making use of the ship(s) and finally to the parties who book their cargoes onboard the ships. Irrespectively whether this is by container, in bales or in bulk, cargo will have to contribute to the allowance, rather sooner than later! Have you looked into your supply chain and what these new measures may result into for your commercial activities? Have you thought about wording of your contracts and the liabilities. Since the final calculation will be about one year later only, will you be able to absorb these extra costs then or will you think of a modus operandum for covering, future, costs (since the allowances/certificates may of course vary in price as a consequence of supply and demand). Not adapting to these EU ETS rules will lead to penalties. There is little escape, it seems, this time. Although there are some question marks, for instance how it will be applied on non-European ship-owners who call irregular European port (think of the Chinese ship-owner calling once or twice a year) it will affect all owners. Perhaps it will go smoothly, like the millenium transition of the internet, but it can also become ground for many discussions and disputes. 


All in all, better to think about it how to handle the ruling than being surprised once it is in place. 

The goal of the rules is to induce Owners to bring down emissions. This can be managed by bio-fuels, alternative fuels, sail-support etc and calculated how this works out in the allowances (a challenge for the ship-owners) for which formulas are already available. Owners and Time Charterers can look for alternatives for  bio- and alternative fuels such as rotor-sails, sky-sails, special fouling, shape of hull or screws. Alternatively to use waste-heat of the ships’ engines, carbon capture or getting connection to shore-power whilst in port.This is perhaps not a quick fix but contributes to decreasing consumption and at the same time improving the ship’s ranking on the emission standard. 

 At SeaWorks we work with ships and for shippers and receivers, handle their transport needs and offer consultancy and contractual advice including assistance in disputes over seaborn transportation.