ETS surcharges for EEA port calls live from Jan 1st 2024
As of January 1st 2024 Ship Owners and Managers of cargo vessels above 5,000 GT sailing to EU ports will be a subject of reporting and surrendering emissions allowances under EU Emission Trading System (EU ETS).
For every 1 ton of reported CO2, European Union Allowance (EUA) must be purchased and submitted to the EU each year.
The EU ETS is a market-based mechanism that has been in place since 2005 and which is designed to reduce GHG emissions from the power and industrial sectors. In brief, the ETS places a cap on the total amount of emissions that these sectors can produce and then issues allowances for these emissions that can be bought and sold on a carbon market. The system aims to create an economic incentive for companies to reduce their carbon emissions, as those that emit less than their allowance can sell their surplus allowances to those that emit more.
In May 2023, the EU ETS underwent an expansion to encompass the maritime sector, which contributes approximately 2.5% of the global GHG emissions. Under this extension, all ships docking at EU ports will need to secure allowances to cover their emissions. This regulation applies to shipping companies operating vessels exceeding 5,000 gross tonnages, regardless of their flag or ownership, and encompasses emissions from both voyages within EU territorial waters and those between the EU and third countries.
For numerous shipping companies, the idea of buying and utilizing allowances may seem unfamiliar. The EU ETS functions as a market driven by supply and demand, resulting in some uncertainty regarding the actual price of these allowances.
This aspect of the EU ETS is often seen as a drawback when compared to its alternative, a carbon tax. Unlike the straightforward payment of taxes, the EU ETS requires organizations to become acquainted not only with compliance considerations but also with the dynamics of the market.
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