Europe’s emissions cap for vessels could cost ship industry ‘billions’

Europe’s extension of the Emissions Trading Scheme (ETS) to the maritime sector could cost the industry billions in compliance when it comes into force in January 2024, according to professional indemnity insurer the International Transport Intermediaries Club, managed by Thomas Miller.

The scheme, which caps greenhouse gas emissions for large vessels calling at ports in the European Union, will raise fresh questions over liability between shipowners and ship managers. The ITIC said tensions are already mounting between shipowners and charterers to establish a fair distribution of costs and legal risks driven by the new rules.

Robert Hodge, general manager at ITIC, said ship managers should undertake due diligence to mitigate risks.

“Ship managers will have an important role in managing the scheme for their owners. It is therefore vital that ship management agreements set out the responsibilities and liabilities for doing so.

“The EU ETS is likely to cost the industry billions in extra fees, so ship managers and charterers should assess every aspect of the costs and legal risks associated with the scheme to ensure they are not left in a financially precarious position,” Hodge said.

The EU’s extension of the ETS, which was already in place for the energy and aviation sectors, will cover all CO₂ emissions from ships over 5,000 gross tonnage entering EU ports, regardless of their flag. The system covers 50% of emissions from ships that start or end outside of the EU and 100% of emissions, phased in, for voyages between two EU ports. The scheme will be extended to cover methane and nitrous oxide from 2026.

The ITIC is holding a webinar on 13 December on the EU’s ETS for its members to discuss the challenges and risks of the new legislation.

“The EU ETS comes as a result of the increasing regulatory landscape imposed by the International Maritime Organization and the EU when it comes to reducing GHG for vessels transiting European waters and docking at European ports,” the ITIC said.