Maritime emissions in the EU ETS
- Category: European Union Carbon Market Glossary
The EU legislative framework for greenhouse gas emissions from maritime transport focuses currently solely on monitoring, reporting and verification of emissions.
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25 April 2023 ‘Fit for 55': Council adopts key pieces of legislation delivering on 2030 climate targets Emissions from shipping will be included within the scope of the EU ETS for the first time. Obligations for shipping companies to surrender allowances will be introduced gradually: 40% for verified emissions from 2024, 70% from 2025 and 100% from 2026. Most large vessels will be included within the scope of the EU ETS from the start, while other big vessels, namely offshore vessels, will be included in the 'MRV' regulation on the monitoring, reporting and verification of CO2 emissions from maritime transport first, and only later included in the EU ETS. Non-CO2 emissions (methane and N2O) will be included in the ‘MRV’ regulation from 2024 and in the EU ETS from 2026.
FuelEU Maritime initiative: Provisional agreement to decarbonise the maritime sector
2 June 2022
'Fit for 55': Council and Parliament reach provisional deal on EU ETS maritime The Council and Parliament agreed on a gradual introduction of obligations for shipping companies to surrender allowances: 40% for verified emissions from 2024, 70% for 2025 and 100% for 2026. Most large vessels will be included in the scope of the EU ETS from the start. Big offshore vessels of over 5000 gross tonnage and above will be included in the 'MRV regulation' on the monitoring, reporting and verification of CO2 emissions from maritime transport regulation from 2025 and in the EU ETS from 2027. General cargo vessels and off-shore vessels between 400-5 000 gross tonnage will be included in the MRV regulation from 2025 and their inclusion in EU ETS will be reviewed in 2026. In addition, the agreement takes into account geographical specificities and proposes transitional measures for small islands, ice class ships and journeys relating to outermost regions and public service obligations and strengthens measures to combat the risk of evasion in the maritime sector. Certain member states with a relatively high number of shipping companies will in addition receive 3,5% of the ceiling of the auctioned allowances to be distributed among them. The co-legislators agreed to include non-CO2 emissions (methane and N2O) in the MRV regulation from 2024 and in the EU ETS from 2026.
Commission Communication 'Fit for 55': delivering the EU's 2030 Climate Target on the way to climate neutrality, COM/2021/550 final
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At the EU level, Regulation (EU) 2015/757 on the monitoring, reporting and verification of CO2 emissions from maritime transport (Maritime MRV Regulation) was developed and CO2 emissions from ships above 5000 gross tonnage travelling to or from ports located within the EEA are being monitored, reported and verified since 2018. This is considered as a first step before the pricing of these emissions, and, in the light of regulatory developments, it is probable that maritime activities will be included in the phase 4 of the EU ETS (2021 - 2030).
Directive (EU) 2018/410 states in recital 4 that action from the International Maritime Organization (IMO) or the Union should start from 2023, reducing maritime transport emissions is also a part of the EU economy-wide reduction commitment under the Paris Agreement.
At the global level, a regulatory framework on the energy efficiency of new ships is in place and energy efficiency measures for existing ships have recently been approved. The IMO has also adopted an Initial Strategy on Reduction of Greenhouse Gas Emissions from Ships, which sets a greenhouse gas emission reduction objective of at least 50% by 2050 compared to 2008 levels. Nevertheless, as of July 2021, no adequate measures were in place, either in the EU or at the global level, to achieve the emission reductions necessary from the maritime transport sector to be in line with the EU’s increased level of climate ambition. These measures are also assessed as insufficient to decarbonise international shipping in line with international climate objectives.
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Reducing emissions from the shipping sector, European Commission website |
Links
The European Commission's Inception Impact Assessment of 29 October 2020 (Ref. Ares(2020)6081850) envisions "urgent actions" with respect to emissions from maritime transport:
"In view of the increasing emissions from maritime transport and the limited decarbonisation options available, action in this sector is urgently needed, including as it recovers from the current crisis. While emissions from EU’s international maritime bunkers, a growing sector, are being monitored, reported and verified, they are not covered by the EU ETS or other EU climate legislation, contrary to the EU’s international commitment to economy-wide action under the Paris Agreement. The EU will need to carefully consider its own measures on maritime, next to any global action".
Also the European Commission Communication of 17 September 2020 "Stepping up Europe’s 2030 climate ambition, Investing in a climate-neutral future for the benefit of our people" (COM/2020/562 final) underlines that in accordance with its international commitment to economy-wide action under the Paris Agreement, the EU should include "at least" intra-EU maritime transport in the EU ETS. The above intentions materialised in the European Commission Proposal of 14 July 2021 for a of the European Parliament and of the Council amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union, Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme and Regulation (EU) 2015/757 (COM(2021) 551 final, 2021/0211 (COD)) , which equivocally states that building on data coming from the Maritime MRV Regulation emissions from maritime transport should be included in the existing emissions trading system.
Moreover, to ensure a smooth transition, a phase-in period is envisioned where shipping companies would only have to surrender allowances for a portion of their verified emissions, gradually rising to 100% over 3 years. It is estimated that as around 90 million tons of CO2 would be added through the extension to maritime transport to the existing ETS.
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EU ETS and maritime transport - Fit for 55: European Commission proposal of 14 July 2021
• Gradual extension of the ETS to maritime starting in 2023, with a 3-year phase in period |
The main elements of the ETS Directive which are amended by the said European Commission Proposal of 14 July 2021 - as regards the maritime transport (Article 3, Articles 3g to 3ge, and Article 16) - are the following:
- the definition of “emissions” in Article 3(b) is amended to include emissions from ships performing a maritime transport activity;
- Chapter II of the Directive is expanded to cover “aviation and maritime transport”, Articles 3g to 3ge are added;
- maritime transport is added as a new activity in Annex I;
- new definitions for “shipping company” and “administering authority in respect of shipping companies” are included in Article 3(v) and Article 3(w) respectively.
The extension of the EU ETS to maritime transport applies in respect of emissions from intra-EU voyages, half of the emissions from extra-EU voyages and emissions occurring at berth in an EU port; the same rules that apply to other sectors covered by the EU ETS should apply to maritime transport with regard to auctioning, the transfer, surrender and cancellation of allowances, penalties and registries (Article 16). The obligation to surrender allowances in the maritime transport sector is gradually phased-in over the period 2023 to 2025, with shipping companies having to surrender 100 % of their verified emissions as of 2026 (Article 3ga).
In accordance with this phase-in, to the extent fewer allowances are surrendered in respect of verified emissions for maritime transport during those years, the amount of allowances not surrendered should be cancelled. The monitoring and reporting rules, as well as verification and accreditation rules laid out in Regulation (EU) 2015/757, as amended, shall apply (Articles 3gb and 3gc). In addition to the general EU ETS rules on penalties, expulsion orders can be issued against ships under the responsibility of a shipping company that has failed to surrender allowances for two or more consecutive reporting periods, with the result that ships under its responsibility can be detained by the flag Member State and denied entry into a port under the jurisdiction of a Member State other than the flag State (Article 16(11a)).
Each shipping company falling within the scope of application of the EU ETS is attributed to a Member State – the administering authority – for its administration under the Directive. The administering authority is determined based on where the shipping company is registered. If the company is not registered in a Member State, it is attributed to the Member State where it had the highest number of port calls in the two previous monitoring years. As of 2024, the Commission is to publish and regularly update a list of shipping companies covered by the Directive and their respective administering authority (Article 3gd).
European Commission Proposal of 14 July 2021 for a of the European Parliament and of the Council amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union, Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme and Regulation (EU) 2015/757, COM(2021) 551 final, 2021/0211 (COD)
Article 3
Amendments to Regulation (EU) 2015/757
Regulation (EU) 2015/757 is amended as follows:
(1) in Article 3, the following points (q) and (r) are added:
“(q) ‘administering authority’ means the administering authority in respect of a shipping company referred to in Article 3gd of Directive 2003/87/EC of the European Parliament and of the Council;
(r) ‘aggregated emissions data at company level’ means the sum of the CO2 emissions to be reported by a company under Directive 2003/87/EC, in respect of all ships under its responsibility during the reporting period.”;
(2) in Article 4, the following paragraph 8 is added:
“8. Companies shall report the aggregated emissions data at company level of the ships under their responsibility during a reporting period pursuant to Article 11a.”;
(3) in Article 5, paragraph 2 is replaced by the following:
“2. The Commission is empowered to adopt delegated acts in accordance with Article 23 to amend the methods set out in Annex I and the rules set out in Annex II, in order to take into account revisions of Directive 2003/87/EC, relevant international rules as well as international and European standards. The Commission is also empowered to adopt delegated acts in accordance with Article 23 to amend Annexes I and II in order to refine the elements of the monitoring methods set out therein, in the light of technological and scientific developments and in order to ensure the effective operation of the EU ETS established pursuant to Directive 2003/87/EC.”;
(4) Article 6 is amended as follows:
(a) paragraph 5 is replaced by the following:
“5. Companies shall use standardised monitoring plans based on templates and monitoring plans shall be submitted using automated systems and data exchange formats. Those templates, including the technical rules for their uniform application and automatic transfer, shall be determined by the Commission by means of implementing acts. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 24(2).”;
(b) the following paragraphs 6, 7 and 8 are added:
“6. Within three months of [date of entry into force of revised ETS Directive], companies shall submit to the responsible administering authority a monitoring plan for each of their ships falling under the scope of this Regulation, which shall first be assessed as being in conformity with this Regulation by the verifier.
7. Notwithstanding paragraph 6, for ships falling under the scope of this Regulation for the first time after the entry into force of [date of entry into force of the revised ETS Directive], companies shall submit a monitoring plan in conformity with the requirements of this Regulation to the responsible administering authority without undue delay and no later than three months after each ship's first call in a port under the jurisdiction of a Member State.
8. Within two years of entry into force of [revised ETS Directive], the responsible administering authorities shall approve the monitoring plans submitted by companies in accordance with the rules laid down in the delegated acts adopted by the Commission pursuant to the second subparagraph. For ships falling under the scope of [revised ETS Directive] for the first time after its entry into force, the responsible administering authority shall approve the submitted monitoring plan within four months after the ship’s first call in a port under the jurisdiction of a Member State in accordance with the rules laid down in the delegated acts adopted by the Commission pursuant to the second subparagraph.
The Commission is empowered to adopt delegated acts in accordance with Article 23 to supplement this Regulation concerning rules for the approval of monitoring plans by administering authorities.”;
(5) Article 7 is amended as follows:
(a) in paragraph 4, the second sentence is replaced by the following:
“Following the assessment, the verifier shall notify the company whether those modifications are in conformity. The company shall submit its modified monitoring plan to the responsible administering authority once it has received a notification from the verifier that the monitoring plan is in conformity.”;
(b) the following paragraph 5 is added:
“5. The administering authority shall approve modifications of the monitoring plan under paragraph 2, points (a), (b), (c), (d), in accordance with the rules laid down in the delegated acts adopted by the Commission pursuant to the second subparagraph of this paragraph.
The Commission is empowered to adopt delegated acts in accordance with Article 23 to supplement this Regulation concerning rules for the approval of changes in the monitoring plans by administering authorities.”;
(6) in Article 10, first subparagraph, the following point (k) is added:
“(k) total aggregated CO2 emissions to be reported under Directive 2003/87/EC in relation to maritime transport activities.”;
(7) the following Article 11a is inserted:
“Article 11a
Reporting and submission of the aggregated emissions data at company level
1. Companies shall determine the aggregated emissions data at company level during a reporting period, based on the data of the emissions report and the report referred to in Article 11(2) for each ship that was under their responsibility during the reporting period, in accordance with the rules laid down in the delegated acts adopted pursuant to paragraph 4.
2. From 2024, the company shall submit to the responsible administering authority by 31 March of each year the aggregated emissions data at company level that covers the emissions in the reporting period to be reported under Directive 2003/87/EC in relation to maritime transport activities, in accordance with the rules laid down in the delegated acts adopted pursuant to paragraph 4 and that is verified in accordance with Chapter III of this Regulation (the ‘verified aggregated emissions data at company level’).
3. The administering authority may require companies to submit the verified aggregated emissions data at company level by a date earlier than 31 March, but not earlier than by 28 February.
4. The Commission is empowered to adopt delegated acts in accordance with Article 23 to supplement this Regulation with the rules for the monitoring and reporting of the aggregated data at company level and the submission of the aggregated emissions data at company level to the administering authority.”;
(8) Article 12 is amended as follows:
(a) the title is replaced by the following: “Format of the emissions report and reporting of aggregated emissions data at company level”;
(b) paragraph 1 is replaced by the following:
“1. The emissions report and the reporting of aggregated emissions data at company level shall be submitted using automated systems and data exchange formats, including electronic templates.”;
(9) Article 13 is amended as follows:
(a) paragraph 2 is replaced by the following:
“2. The verifier shall assess the conformity of the emissions report and the report referred to in Article 11(2) with the requirements laid down in Articles 8 to 12 and Annexes I and II.”;
(b) the following paragraphs 5 and 6 are added:
“5. The verifier shall assess the conformity of the aggregated emissions data at company level with the requirements laid down in the delegated acts adopted pursuant to paragraph 6.
Where the verifier concludes, with reasonable assurance, that the aggregated emissions data at company level are free from material misstatements, the verifier shall issue a verification report stating that the aggregated emissions data at company level have been verified as satisfactory in accordance with the rules laid down in the delegated acts adopted pursuant to paragraph 6.
6. The Commission is empowered to adopt delegated acts in accordance with Article 23 to supplement this Regulation with the rules for the verification of the aggregated emissions data at company level and the issuance of a verification report.”;
(10) Article 14 is amended as follows:
(a) in paragraph 2, point (d) is replaced by the following:
“(d) the calculations leading to the determination of the overall CO2 emissions and of the total aggregated CO2 emissions to be reported under Directive 2003/87/EC in relation to maritime transport activities;”;
(b) the following paragraph 4 is added:
“4. When considering the verification of the aggregated emissions data at company level, the verifier shall assess the completeness and the consistency of the reported data with the information provided by the company, including its verified emissions reports and the report referred to in Article 11(2).”;
(11) in Article 15, the following paragraph 6 is added:
“6. In respect of the verification of aggregated emissions data at company level, the verifier and the company shall comply with the verification rules laid down in the delegated acts adopted pursuant to the second subparagraph. The verifier shall not verify the emissions report and the report referred to in Article 11(2) of each ship under the responsibility of the company.
The Commission is empowered to adopt delegated acts in accordance with Article 23 to supplement this Regulation with the rules for the verification of aggregated emissions data at company level, including the verification methods and verification procedure.”;
(12) in Article 16, paragraph 1 is replaced by the following:
“1. Verifiers that assess the monitoring plans, the emissions reports and the aggregated emissions data at company level, and issue verification reports and documents of compliance referred to in this Regulation shall be accredited for activities under the scope of this Regulation by a national accreditation body pursuant to Regulation (EC) No 765/2008.”;
(13) in Article 20, paragraph 3 is replaced by the following:
“3. In the case of ships that have failed to comply with the monitoring and reporting requirements for two or more consecutive reporting periods and where other enforcement measures have failed to ensure compliance, the competent authority of the Member State of the port of entry may, after giving the opportunity to the company concerned to submit its observations, issue an expulsion order which shall be notified to the Commission, EMSA, the other Member States and the flag State concerned. As a result of the issuing of such an expulsion order, every Member State, with the exception of the Member State whose flag the ship is flying, shall refuse entry of the ship concerned into any of its ports until the company fulfils its monitoring and reporting obligations in accordance with Articles 11 and 18. Where the ship flies the flag of a Member State, the Member State concerned shall, after giving the opportunity to the company concerned to submit its observations, order the ship to be detained until the company fulfils its obligations. The fulfilment of those obligations shall be confirmed by the notification of a valid document of compliance to the competent national authority which issued the expulsion order. This paragraph shall be without prejudice to international maritime rules applicable in the case of ships in distress.”;
(14) Article 23 is amended as follows:
(a) in paragraph 2, the following subparagraph is added:
“The power to adopt delegated acts referred to in Article 5(2), as regards ensuring the functioning of the EU ETS, and Articles 6(8), 7(5), 11a(4), 13(6) and 15(6) shall be conferred on the Commission for an indeterminate period of time from the entry into force of [revised MRV Regulation].”;
(b) in paragraphs 3 and 5, the words “Articles 5(2), 15(5), 16(3)” are replaced by the words “Articles 5(2), 6(8), 7(5), 11a(4), 13(6) 15(5), 15(6) and 16(3)”.
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Outcome of the legislative process
On 2 June 2022, the Transport Council reached a general approach on the proposal. On 23 March 2023 the provisional political agreement between the Council and the European Parliament has been reached to decarbonise the maritime sector. The text of the provisional agreement retains the core aspects of the Commission’s proposal. The co-legislators made some amendments, in particular:
- introducing time limited exceptions for the specific treatment of the outermost regions, small islands, and areas economically highly dependent on their connectivity,
- introducing reduction factors for ice classed ships, as well as ships navigating in ice,
- increasing the reduction targets for the greenhouse gas intensity of energy used on board by ships as from 1 January 2035 and introducing measures to encourage the use of the so-called renewable fuels of non biological origin (RFNBO),
- amending the requirements for on-shore power supply (OPS) and provisions relating to zero-emission technologies based on the underlying principle that the system should be coherent with the Alternative Fuel Infrastructure Regulation (AFIR),
- excluding fossil fuels from the certification process when it comes to the certification of fuels but also improving the provision to make the process more future proof,
- amending the provisions on revenues generated from the penalties under the FuelEU regulation and their allocation to projects to support decarbonisation of the maritime sector with an enhanced transparency mechanism,
- further specifying the Commission’s obligations to monitor the implementation of the regulation in the relevant report and review clause.
Regulatory chronicle