EU ETS Shipping Explained: Carbon Pricing at Sea

Shipping has increasingly been under pressure to address its environmental footprint. The European Union has already introduced maritime emissions into its carbon market under the EU Emissions Trading System (ETS), while the UK ETS, which does not yet include maritime emissions, is scheduled to include them in 2026. 

Struggling to meet your EU ETS emissions obligations? At CFP Energy, we help shipping operators navigate complex regulations and reduce their carbon emissions. To see how we can help with your ETS allowances and maritime compliance strategy, contact our team today. 

What is the EU ETS for Shipping? 

The EU ETS for shipping extends Europe's 'cap and trade' system to include greenhouse gas emissions from larger vessels. The initial scope covers vessels exceeding 5,000 gross tonnage that dock at EU/EEA ports, creating direct financial liability for emissions and compelling operators to address their carbon footprint. 

At present, the ETS focuses on carbon dioxide (CO2). But as part of the wider 'Fit for 55' plan, the system will broaden from 2026 to cover methane (CH4) and nitrous oxide (N2O) too, showing a bigger push to reduce all maritime greenhouse gases.

How it Works: The Allowance Obligation

 The main rule of shipping EU ETS is simple: operators must track their emissions on covered voyages. Then, each year, they must hand over enough EU ETS carbon allowances (EUAs) to cover those emissions.

To simplify the process, the allowance requirement is being rolled out in stages. For emissions from 2024, companies only need to surrender 40% of their verified total. For 2025 emissions, this goes up to 70% and hits 100% for 2026 and beyond. This incremental approach gives operators time to adjust to the regulations.

For reporting and working with approved verifiers, meanwhile, firms will need to use platforms like THETIS-MRV.

Impacts on the Maritime Sector

EU ETS shipping now puts a direct price on carbon emissions. This financial pressure is intended to encourage the shipping industry to make real changes. Maritime operators now have a strong incentive to improve their energy efficiency across their fleet, addressing their climate impact in turn. 

In practice, this can be implemented in a number of ways: it might mean smarter routes, better propulsion systems, or new ways of running operations.

The system also helps accelerate the shift to cleaner fuels. As burning fossil fuels gets pricier due to carbon costs, alternative fuels like biofuels, including FAME and HVO, start to look much more appealing financially. In addition, the EU ETS requires strict monitoring, reporting and verification of emissions (MRV) - further incentivising the decarbonisation of a high-emitting sector.

The EU ETS for Shipping in the UK Context

 The UK operates its own emissions trading system, which will expand to include domestic shipping from 2026. Unlike the EU's focus on international voyages, the UK ETS will cover emissions from voyages between UK ports and emissions generated during port stays. This creates a patchwork of carbon pricing across European waters.

The UK, however, runs its separate carbon market - the UK ETS. This system is completely independent of the EU ETS. Both aim to cut carbon using market tools but apply rules to shipping in different ways.

The UK ETS, as distinct from the shipping EU ETS, is set to grow from 2026 to include emissions from journeys within its waters, covering trips between UK ports and emissions while ships are docked at UK berths.

In other words, while the EU scheme targets international voyages, the UK's version focuses solely on domestic routes. For those shipping operators working in both areas, this means they will have to negotiate two distinct but linked carbon pricing systems.

Navigating Carbon Pricing with CFP Energy

Carbon pricing rules are changing in the shipping EU ETS, bringing both challenges and opportunities.

At CFP Energy, we offer a range of cutting-edge biofuels, including FAME and HVO, as well as EUAs to meet compliance and manage your exposure. Our goal is to streamline your procurement with carbon pricing that fits into your wider plans to cut emissions, aiming for changes that are both sustainable and cost-effective. To see how we can help, contact our team today.