EU ETS And FuelEU Call For Proactive Risk Management

The EU Emissions Trading System (EU ETS) and FuelEU Maritime regulations will have far-reaching implications for shipowners, managers, and charterers with vessels trading to, from, or within the bloc. The system is complex and could lead to penalties for non-compliance but also, with careful management, opportunities for competitive advantages.

Wide range of obligations

The EU ETS, in operation for maritime since 1 January 2024, imposes a wide range of obligations on owners, managers and their customers, and requires proactive risk management. This was the key message from a recent LR webinar – Optimising compliance under the EU’s new emissions regime.

The key message was clear: the new system requires careful management at various levels, from strategic decision-making and emissions prediction through to careful fuel management using routing strategies and other voyage optimisation techniques.

The EU ETS will initially apply to cargo ships and passenger ships of 5,000 gross tons and above. From 2025, offshore ships of 5,000 gross tons and above, as well as offshore and general cargo ships of 400 to 5,000 gross tons will have to report emissions under the monitoring, reporting, verification (MRV) system and will likely fall into scope of ETS in the future. Offshore ships of 5,000 gross tons and above will then fall into scope of ETS from 2027.

New range of manager

The EU ETS is complex and has introduced an entirely new range of management challenges for those involved in shipping’s value chain. The first point, outlined by Riley-James, is the tight timetable of activity, which means that owners, managers or charterers will have to buy sufficient EU Allowances (EUAs) on the carbon market to cover the emissions from all ships mandated as under their responsibility for MRV and ETS compliance in the previous calendar year, surrendering them annually by each September at the latest.

The EU will set a cap on the volumes of emissions allowed across all industrial sectors. Over time the cap will be lowered and the number of EUAs available for purchase reduced. This is part of the EU’s target of reducing greenhouse gas (GHG) emissions by 55% by 2030 compared with 1990, and to achieve net-zero by 2050.

FuelEU Maritime will ensure that shipping companies prioritise improvements in the GHG emissions intensity of the energy they use. FuelEU enters into force on 1 January 2025 with data collection requirements (Monitoring Plans are required from 31 August 2024) and applies generally to ships of above 5000 GT.

FuelEU sets GHG intensity reduction targets for the energy used onboard compared to a 2020 baseline (from MRV data). Annually ships will need to meet the reduction target or be in a compliance surplus in order to comply. Failure to do so will result in a penalty to be paid. This is separate and in addition to any ETS penalty payment and EUA purchase and surrender.

Commercial considerations – ballast hauls

There are also operational issues to consider. Groeger gave the example of a vessel discharging its cargo in Spain and then going to a Gibraltar anchorage for orders. If it was then fixed to load cargo in the US Gulf, for example, the ballast haul from the Gibraltar anchorage across the Atlantic would be considered as part of the ship’s cargo operations and the entire ballast haul would be subject to the 50% emissions calculation.

Just as there are challenges relating to ballast hauls, there could be opportunities too, the experts noted. Depending on the nature of the charter contract, there could be strategic port calls to minimise ETS liabilities. Weather routing and route optimisation, therefore, will be essential tools in helping to ensure that ships remain on their likely emissions performance targets.

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Source : Lr. Org

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