The maritime shipping industry is preparing for a major milestone: the first large-scale verification and surrender of carbon credits under the EU Emissions Trading System (EU ETS). This system requires shipping companies to monitor, report, and verify their greenhouse gas emissions, reports AJOT.
Compliance Cost
Compliance costs for the maritime industry are projected to triple in the next two years as EU ETS emissions liabilities increase from 40% last year to 100% in 2026. Adding to this complexity, FuelEU Maritime, implemented on January 1st of this year, introduces further financial burdens and a higher risk of errors.
Albrecht Grell, Managing Director of OceanScore, emphasizes the importance of transparency in managing this risk, stating, “The way to manage this risk is transparency. Real-time exposure tracking, based on reliable data, is a necessity. Continuously monitoring full-year outlooks, especially regarding a shipping company’s FuelEU exposure, will help avoid costly mistakes.”
Current tracking tools, including those offered by verifiers, automated applications, and vessel performance management solutions, may provide total cost figures for EU ETS and FuelEU but lack certain key functionalities.
Cost Accountability
Assigning cost accountability among stakeholders is further complicated by the differing responsible parties under each regulation.
- EU ETS: The shipowner is designated as the responsible party but can delegate this to the DOC holder (typically the ISM manager). Charter periods are covered by the charterer, adhering to the “polluter pays” principle.
- FuelEU: The DOC holder is solely responsible, even though the regulation affects the same vessels and charter relationships. There is no regulatory enforcement of cost-sharing agreements, so the “polluter pays” principle must be contractually agreed upon.
Spot market operations add another layer of complexity, as compliance costs are often incorporated into freight rates.
Complex Interrelations
Standard accounting and reporting systems are ill-equipped to manage the complex inter-stakeholder relationships and compliance structures required for accurate exposure determination. This can result in several issues, including:
- Lack of visibility regarding off-hires, which are typically not included in verifier reports.
- Inconsistent invoicing due to inaccurate operational data.
- Valuation issues arising from compliance “payments” not always being in Euros or Dollars (the currencies typically tracked in standard accounting systems). For example, EU ETS obligations can be met with EUAs, while FuelEU allows cash to be substituted with pooling opportunities accounted for in tonnes of CO2e.
Grell points out that the data generation burden for companies with large fleets, diverse operating models, and multiple charterers with varying clauses will quickly overwhelm traditional tracking methods like spreadsheets, especially as regulations expand.
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Source: AJOT
