Maritime EU ETS scope and phase-in 2024-2027

Background: extending ETS to maritime transport

The European Union Emissions Trading System was launched in 2005 as the world’s first multi-country cap and trade scheme for greenhouse gases. For its first eighteen years it covered roughly 10,000 industrial installations and intra-European aviation, but it left international shipping outside the cap. Maritime carbon policy at the European level had been limited to the EU MRV Regulation (Regulation (EU) 2015/757), which from 2018 required ships above 5,000 GT calling at EEA ports to monitor, report and verify CO2 emissions, fuel consumption and transport work. MRV produced data; it produced no compliance obligation.

The 2019 European Green Deal changed the political balance. The Commission’s 2021 “Fit for 55” package proposed bringing shipping inside the ETS cap on the same legal basis as aviation and stationary installations. After roughly eighteen months of trilogue negotiation between Parliament, Council and Commission, the agreement was published in the Official Journal on 16 May 2023 as Directive (EU) 2023/959. The directive amends the master ETS legal text, Directive 2003/87/EC, with a maritime-specific chapter that defines scope, phase-in, monitoring obligations and the role of administering authorities for shipping companies.

The economic rationale is straightforward. International shipping accounts for roughly 3% of global anthropogenic CO2 emissions and a higher share of black carbon, NOx and SOx where regulated. Inside Europe, shipping contributes around 3-4% of regional CO2. Pricing those emissions inside the same market that already prices steel, cement, aluminium and electricity emissions establishes a single carbon signal across the European economy. It also closes a loophole: a refinery onshore was paying for CO2; the bunker burned by the ship loading product at its jetty was not.

The directive sits inside a wider regulatory bundle. FuelEU Maritime (Regulation (EU) 2023/1805) tackles GHG intensity of energy used by ships from 2025. The Energy Taxation Directive review will eventually remove the bunker fuel tax exemption. The AFIR Regulation mandates shore power and alternative fuel infrastructure at TEN-T core ports. EU ETS provides the price; FuelEU Maritime provides the intensity ratchet; AFIR provides the infrastructure; and the Renewable Energy Directive defines what counts as renewable fuel of non-biological origin. A practical compliance team has to track all four simultaneously.

Directive (EU) 2023/959: amendments to Directive 2003/87/EC

Directive (EU) 2023/959 is technically an amending directive: it does not stand alone but inserts new provisions into Directive 2003/87/EC and into Regulation (EU) 2015/757. The key insertions for shipping are:

• New Chapter II of the consolidated 2003/87/EC text, “Aviation and maritime transport”, with maritime-specific rules.
• Article 3g: definition of voyages in scope and the territorial scope formula.
• Article 3ga: phase-in trajectory for surrender obligations.
• Article 3gb: scope of CO2, methane and nitrous oxide coverage.
• Article 3gc: exemptions for ice-class ships under specified conditions.
• Article 3gd: small-islands and outermost-region derogations.
• Article 3ge: ferry derogations.
• Article 12: surrender mechanics including the maritime account and the 30 September deadline.
• Article 16: penalty framework, including the EUR 100 per tonne CO2-equivalent non-surrender penalty.
• Article 18a: administering authority allocation for shipping companies.
• Article 30k: review clauses, including the offshore phase-in review by mid-2026.

The directive also folds amendments into Regulation (EU) 2015/757 to align MRV monitoring rules with ETS surrender. From 2024, MRV reporting carries direct legal weight: the verified emissions report becomes the basis for surrender liability. The same MRV verifiers, accredited under Commission Delegated Regulation (EU) 2023/2917, sign off both the MRV emissions report and the company-level emissions report submitted to the administering authority by 31 March each year.

The legal architecture inside the maritime chapter is deliberately mirrored on the aviation chapter that has operated since 2012. The same family of concepts applies: an administering authority per operator, an allowance unit (the EUA, fungible with the wider ETS market), a verified emissions report, a single surrender deadline, and a monetary penalty for shortfall. What differs is the geographic scope formula, the gas coverage trajectory and the existence of sector-specific carve-outs that aviation does not have.

Eligible ships: 5,000 GT threshold and commercial voyages

The basic scope rule is simple in form. A ship is in scope of the maritime ETS for a given voyage if all four conditions hold:

1. The ship has gross tonnage of 5,000 or above as recorded on its International Tonnage Certificate (ITC 1969).
2. The ship is engaged in the carriage of passengers or cargo for commercial purposes.
3. The voyage either departs from, arrives at, or takes place between EU or EEA ports as defined in Article 3 of Directive 2003/87/EC.
4. The ship is not in one of the excluded categories (warships, government non-commercial vessels, fishing vessels in the active fishing role, search-and-rescue and similar).

The 5,000 GT threshold was carried over from the EU MRV Regulation. It is a sharp cliff: a ship of 4,999 GT is fully outside the ETS, while a ship of 5,000 GT is fully inside. This generates a small distortion at the boundary; some specialist owners have built tonnage just under the threshold deliberately to stay out of MRV and ETS, although the practical economics of below-5,000 GT ships are dominated by other factors.

The directive distinguishes ships by category. Cargo ships, passenger ships, container ships, ro-ro ships, ro-pax ships and bulk carriers above 5,000 GT are inside from 1 January 2024. Offshore vessels above 5,000 GT, including supply ships, well-stimulation vessels, dive support vessels, accommodation units and similar, are inside from 1 January 2027. General cargo ships and offshore vessels of 400 to 5,000 GT are subject to MRV-only obligations from 2025 and may be added to ETS surrender after a Commission review under Article 30k. Fishing vessels of any tonnage remain outside while they are in active fishing operations.

The “commercial purposes” qualifier excludes a small set of operations: a ship operated solely for owner private purposes, a ship in delivery voyage as a newbuild before commercial entry, a ship in dry dock or in lay-up. Lay-up is treated by reference to whether the ship has any voyage activity in the reporting period; a ship that did not move and consumed only auxiliary fuel for hotel load may still owe ETS for at-berth emissions if it remained at an EU berth.

Territorial scope formula: 50% extra-EU, 100% intra-EU and at-berth

The territorial scope formula is the load-bearing wall of the maritime ETS architecture. It allocates a percentage of each voyage’s covered emissions to the EU compliance bucket based on where the voyage starts and ends. Three buckets exist:

Intra-EU voyages count fully because both endpoints are inside the regulated geography. Extra-EU voyages count at half because only one endpoint is inside the regulated geography, and the other half of the voyage’s emissions are “outside” the EU policy space. At-berth emissions count fully because the ship is physically inside an EU port for the duration of those emissions. Pure non-EU voyages do not count at all, even if the ship that performed them is the same hull that called at an EU port the day before.

The formula expressed mathematically is:

where $E_{\text{intra}}$ is total CO2 emitted on intra-EU voyages, $E_{\text{extra}}$ is total CO2 emitted on extra-EU voyages where one end is an EU port, $E_{\text{at-berth}}$ is total CO2 emitted at berth in EU ports, and $k_{\text{phase-in}}(y)$ is the year-dependent surrender coefficient defined below.

The 50% factor for extra-EU voyages was politically chosen as a compromise. Under earlier proposals the EU considered a “100% on the EU leg only, with a complex break point” structure; that proved unworkable for routes with bunkering offshore. The 50% factor sidesteps the question of where on the great-circle track the emissions “actually” occurred. It is administratively clean and matches the equivalent geographical split historically used in the aviation chapter for non-EU flights before that chapter was narrowed to intra-EEA only.

The combined EUA liability formula with the phase-in coefficient is:

The territorial scope and the phase-in compose multiplicatively; a ship on a 100%-scope intra-EU voyage in 2024 surrenders 40% of its CO2 because the phase-in applies, while a ship on a 50%-scope extra-EU voyage in 2024 surrenders 20% because both factors stack. From 2026 the territorial scope is the only remaining lever.

A separate provision protects against ships systematically diverting to a transhipment hub just outside the EU to convert intra-EU voyages into two extra-EU voyages. Article 3g(3) of the amended directive gives the Commission power to designate non-EU container transhipment ports closer than 300 nautical miles to an EU port as if they were EU ports for the purpose of the scope formula. Tanger Med, East Port Said and Port of Damietta have been on watchlists; the Commission published a list in implementing acts that is periodically updated.

Voyage definition for ETS purposes

A voyage for ETS purposes is defined consistently with the EU MRV Regulation: it is the movement of a ship from one port of call to the next, where a port of call is a stop at a port for cargo or passenger operations or other commercial activity. The legal definition is in Regulation (EU) 2015/757 Article 3(c) and it is imported wholesale into the ETS chapter.

A few subtleties matter:

• A bunker-only stop where no cargo or passenger operations take place is not a port of call. A ship that loads cargo in Hamburg, bunkers at Skaw anchorage and discharges in New York performs a single Hamburg-New York voyage at 50% scope, not two voyages. Anchoring solely for STS bunker delivery does not break the voyage chain.
• An STS cargo transfer where cargo is exchanged between two ships at sea or at an offshore anchorage is treated as a port of call for both ships, even though the location is not a designated port. The voyage from origin port to the STS location is one voyage, and from the STS location to the destination port is another voyage, with each end allocated according to whether the STS coordinates fall inside or outside EU/EEA waters.
• A port that the ship enters solely for emergency or safety reasons (refuge port, medical evacuation, weather avoidance) does not count as a port of call. The voyage continues across the deviation.
• Shipyard calls for dry-docking, repair or modification are treated as ports of call when commercial activity also occurs (e.g., the ship loads or discharges cargo at the yard’s berth), and as non-calls otherwise.

These definitions are tightened in Commission Implementing Regulation (EU) 2023/2599, which sets out the monitoring rules for shipping companies under both MRV and ETS, including a unified voyage register. The voyage register must record start and end timestamps with port LOCODE, distance sailed, fuel consumed by fuel type, and any in-port time at berth or anchor.

The “two anchored slabs of fuel” issue gets attention in the implementing regulation. Fuel consumed at anchorage that lies inside the boundary of an EU port (typically defined by the port limits in the IMO LOCODE register) counts as at-berth emissions and is in scope at 100%. Fuel consumed at an offshore anchorage that lies outside port limits, even if the ship is functionally waiting for a slot at an EU port, is allocated to the inbound voyage and is in scope at 100% if both endpoints are EU and 50% if the inbound is from a non-EU port.

Gas coverage phase-in: 2024 CO2 only; 2026 CO2+CH4+N2O

EU ETS originally covered CO2 only and added N2O from nitric acid plants and PFCs from aluminium smelting in later phases. For maritime, the directive defines a two-step gas trajectory:

The 2024-2025 CO2-only window matches the existing MRV Regulation pre-amendment. Methane and nitrous oxide were not part of MRV monitoring until the amending Regulation (EU) 2023/957, which extended MRV to CH4 and N2O from 2024 reporting in preparation for the 2026 ETS expansion. From 2026, surrender liability is computed on CO2-equivalent emissions using the global warming potentials specified in the amending directive, currently GWP100 = 28 for CH4 and 265 for N2O following IPCC AR5.

This matters most for LNG-fuelled and dual-fuel ships, where methane slip from the engine combustion process and from venting and pilot fuel ignition can shift the CO2-equivalent footprint materially. A modern Wartsila or MAN low-pressure dual-fuel engine has slip in the 0.2-1.5% of fuel range depending on load and engine type. A high-pressure diesel-cycle engine such as the MAN ME-GI has near-zero slip. For a ship burning 30,000 t of LNG annually, a slip of 1% means 300 t of methane, which at GWP100 = 28 is 8,400 t of CO2-equivalent: enough to materially alter the EUA bill from 2026.

The methane GWP is the subject of ongoing scientific update. The Commission committed in Article 30k to review the GWPs against the latest IPCC findings; current science (IPCC AR6) places GWP100 for methane closer to 27.9 with no climate-carbon feedbacks or 29.8 with feedbacks, and GWP20 at over 80. Operators planning long-lived assets should run sensitivity scenarios at GWP20 figures because a future political shift to a 20-year horizon would multiply the methane bill by about 2.5x.

N2O emissions from marine engines are small in absolute terms; combustion of HFO or VLSFO produces of order 0.05-0.15 g N2O per kWh, which for a typical large ocean-going ship adds 1-3% to CO2-equivalent emissions. N2O from selective catalytic reduction units fitted for IMO Tier III NOx compliance can be higher under poor SCR temperature control.

Surrender phase-in: 40% / 70% / 100%

The surrender phase-in applies a year-dependent reduction to the territorial-scope-adjusted emissions to soften the introduction of the regime:

The reduction does not change which emissions are reported; MRV verification still produces a number for 100% of covered emissions, and the 40% or 70% factor is applied at the surrender step inside the company’s Union Registry account. A ship that emits 10,000 t CO2 on intra-EU voyages in 2024 reports 10,000 t but surrenders 4,000 EUAs by 30 September 2025.

The phase-in matters for cash-flow planning. A company with a 2024 covered emissions figure of 100,000 t pays 40,000 EUAs in 2025; with prices in the EUR 60-100 per EUA range this is EUR 2.4-4 million. The same fleet at unchanged emissions will pay 70,000 EUAs in 2026 (EUR 4.2-7 million) and 100,000 EUAs in 2027 (EUR 6-10 million). Fleet renewal and intensity reduction need to outpace the phase-in to keep the bill flat.

The phase-in is unilateral. The directive does not provide for re-extension of the 40-70 trajectory if EUA prices spike or if the wider economy slows. Article 30k contains a review clause that obliges the Commission to assess the impact on competitiveness and modal shift and to propose adjustments if material distortions are observed; in practice the political consensus has been to hold the trajectory.

The 30 September surrender deadline is annual. For 2024 emissions, surrender is due by 30 September 2025; for 2025 emissions, by 30 September 2026; for 2026 emissions, by 30 September 2027. The deadline is hard. There is no grace period and no rolling reconciliation; missing the deadline triggers the EUR 100 per tonne penalty and obligation to surrender the missed allowances regardless.

Offshore vessels: exemption until 2027 and category-specific entry

Offshore vessels were the most contested carve-out in the 2022-2023 trilogue. The Council, pushed by Norway and the Netherlands, argued that offshore service vessels operate in unique patterns, often ferrying between EU and non-EU offshore installations on short, fuel-intensive routes, and that immediate inclusion would distort competition with non-EU offshore service providers operating the same fields under flag-of-convenience arrangements.

The compromise is in Article 30k(2) of the amended directive:

• Offshore vessels above 5,000 GT are outside the ETS scope from 2024 to 2026 inclusive but are subject to MRV-only monitoring obligations during that window. Their emissions data accumulates during the carve-out period.
• From 1 January 2027, offshore vessels above 5,000 GT are inside the ETS at the full 100% surrender coefficient and are not eligible for an additional phase-in. They enter at full obligation directly.
• Offshore vessels of 400 to 5,000 GT are subject to MRV-only obligations from 2025 with no current ETS surrender. Whether they enter ETS surrender at any point depends on a Commission review by 31 December 2026.

The “offshore vessel” definition uses the EU MRV ship categorisation. It captures: platform supply vessels (PSVs), anchor-handling tug supply vessels (AHTSs), well-stimulation vessels, accommodation units, dive support vessels, multi-purpose offshore vessels, crew transfer vessels above 400 GT, and similar. Mobile offshore drilling units (MODUs) are outside the definition because they are platforms in the regulatory sense, not ships, and are covered by the stationary ETS regime when their emissions trigger Annex I thresholds.

Floating production storage and offloading units (FPSOs) and floating storage units (FSUs) are an edge case. When an FPSO is moored at a permanent location for production, it is classed as a stationary installation and falls under the stationary ETS chapter if emissions exceed thresholds. When an FPSO is on transit between sites, it is classed as a ship and falls under the maritime chapter. The transition between modes is contentious and is handled case-by-case by the administering authority.

The 2027 offshore entry has compounded planning complexity. An offshore operator with a fleet of 30 PSVs and AHTS vessels above 5,000 GT must build the same compliance infrastructure as a tanker operator (verified MRV reports, Union Registry account, surrender process, BIMCO clause negotiation) but starting two years later, then enter at 100% surrender from day one without phase-in cushion.

Passenger ferry derogations

Passenger ferries serving certain island and remote-region routes have received time-limited derogations to avoid disrupting essential transport for communities with no road or rail alternative. The directive provides:

• Article 3ge allows member states to apply for a derogation for passenger ships and ro-pax ships providing public service obligation routes between an EU port and another EU port where one or both ports are on a small island or in an outermost region.
• The derogation runs until 31 December 2030, after which it expires unless extended by amending legislation.
• The derogation is conditional on the route being subject to a public service obligation under Regulation (EC) No 3577/92 or an equivalent national framework.

Member states have used this provision selectively. Greece filed derogations covering most Aegean and Ionian ferry routes serving islands of fewer than 200,000 inhabitants. Croatia filed derogations for Adriatic island routes. France has applied derogations for routes to Corsica and certain DOM-TOM links. Italy has filed for Sicilian, Sardinian and minor-island routes.

The derogations apply only to the passenger ship and ferry component of those routes. Cargo ships on the same routes do not benefit. A ship that combines passenger and cargo functions (ro-pax) is treated according to its EU MRV ship category; if categorised as ro-pax it benefits from the derogation, if categorised as a vehicle carrier or general cargo it does not.

The derogations also do not reach beyond 2030. The Commission’s published rationale is that island ferry routes have time to electrify, switch to LNG with biomethane drop-in, or adopt hybrid solutions over a 6-7 year transition window. After 2030 these routes will pay full ETS like any other intra-EU route.

SIDS exclusions during phase-in

Small Island Developing States (SIDS) are not part of the EU but are recognised in international climate diplomacy as a distinct category requiring differentiated treatment. The maritime ETS does not directly exclude voyages to SIDS, because doing so would create a route diversion incentive. It does, though, recognise SIDS in two ways:

• Voyages between an EU port and a port in a SIDS are subject to the standard 50% extra-EU scope, with no special reduction.
• The directive requires the Commission to include SIDS in the international cooperation track and to advocate at IMO for an equivalent global market-based measure that would replace or complement the EU ETS for international voyages.

A more direct SIDS provision is found in the CBAM legal framework (Regulation (EU) 2023/956), which provides for SIDS-origin imports to be considered for transition support. This is a parallel track and does not directly affect maritime ETS surrender, but it means the EU’s overall climate package treats SIDS asymmetrically from non-SIDS extra-EU partners.

For shipping companies, the practical takeaway is that SIDS voyages count at 50% like any other extra-EU voyage during the phase-in. There is no SIDS-specific scope reduction, no SIDS-specific phase-in trajectory, and no SIDS-specific exemption.

Ice-class adjustments (Article 12)

Ships with a high ice class operate at lower transport efficiency in winter conditions than equivalent ships without ice strengthening. Ice navigation requires reduced speed in ice, often with icebreaker escort; the hull form for ice operations is less hydrodynamically efficient in open water; and Baltic and Arctic winter routes have longer effective distances due to ice avoidance. The EU recognised this through an ice-class adjustment that reduces the reported CO2 emissions tonnage on which surrender is calculated.

The adjustment is grounded in Annex V Part C of the amended Directive 2003/87/EC, with operational rules in Commission Implementing Regulation (EU) 2023/2599. The mechanic is:

• A ship with a Finnish-Swedish ice class IA Super, IA, IB or IC (or equivalent IACS Polar Class) qualifies.
• For voyages performed during the defined ice season (typically 1 November to 31 May for Baltic operations, with regional variants) and through ice-affected waters, a reduction factor is applied to the reported CO2.
• The reduction factor is up to 5% for IA Super, scaling down for lower ice classes.
• The reduction applies only to the CO2 reported on those voyages, not to the whole annual emissions.

Operators must document the ice class certificate and the voyage ice conditions in the MRV verified emissions report. Verifiers cross-check the ice class against Finnish Maritime Administration registers and the voyage ice conditions against Finnish-Swedish Ice Service or Norwegian Meteorological Institute records.

The ice-class adjustment is small in absolute terms for most fleets but material for tonnage operating exclusively in the Baltic and the Gulf of Bothnia: a Finnish-flag tanker operating between Naantali and Sköldvik through the winter season may save 3-4% on its annual EUA bill through this provision.

Small-islands derogation (≤2,000 GT remote-island routes)

A separate derogation in Article 3gd of the amended directive applies to small ships on remote-island routes. The conditions are tight:

• The ship is 2,000 GT or below.
• The voyage is between an EU port and a port on a small island that is part of the same EU member state, where the island has fewer than 200,000 permanent inhabitants and is not connected to mainland Europe by road or rail.
• The route is subject to a public service obligation or operates on a route declared by the member state as serving an island community.
• The derogation runs until 31 December 2030.

Greece has applied this derogation extensively for inter-island Aegean routes operated by small ferries. Similar applications exist for Italian, Croatian, Portuguese (Azores and Madeira inner-island routes) and Spanish (Balearic inner-island and Canary inner-island routes) cases.

The derogation is narrow because the 5,000 GT threshold already excludes most small ships from the ETS. The 2,000 GT threshold applies only where a ship has crossed the 5,000 GT line because the small-island derogation lifts the threshold downward to 2,000 GT for those qualifying routes. The combined effect is that ships of 2,000-5,000 GT operating qualifying routes remain outside ETS until 2030.

After 2030, the derogation expires. Member states are expected to use the 7-year window to invest in decarbonisation infrastructure for these routes (battery-electric ferries, shore power, biomethane bunkering at small ports). Some routes will need to electrify; some will retire ageing tonnage and replace with smaller, more efficient ships that fall below the 5,000 GT MRV threshold and so escape the regime entirely.

Combined effect with FuelEU Maritime: avoiding double burden

EU ETS and FuelEU Maritime are deliberately complementary, not competing, instruments. ETS prices a tonne of CO2-equivalent at the market clearing rate. FuelEU Maritime caps the GHG intensity of energy used onboard, expressed in gCO2eq per MJ on a well-to-wake basis, and reduces the cap progressively from 2025.

The two regimes overlap in scope:

• Same ship population (above 5,000 GT in commercial voyage activity).
• Same geographic scope formula (100% intra-EU, 50% extra-EU, 100% at-berth).
• Same MRV data backbone (the EU MRV Regulation as amended).

They differ in metric and in penalty:

• ETS uses mass of CO2-equivalent times an EUA price.
• FuelEU uses GHG intensity gap from target times a fixed EUR 2,400 per tonne VLSFO-equivalent penalty.
• ETS provides flexibility through allowance trading in the wider market.
• FuelEU provides flexibility through pooling and banking of compliance balance among shipping companies.

The “double burden” concern is that a ship using fossil fuel pays for the same CO2 emission twice: once through ETS surrender and once through FuelEU penalty for non-compliance. The directive addresses this by structuring the FuelEU penalty as a deficit penalty that applies only to the GHG intensity shortfall, not to the absolute CO2 emission. A ship that meets its FuelEU intensity target pays no FuelEU penalty regardless of its absolute emissions; it still pays full ETS on its absolute emissions.

In practice the two regimes pull in the same direction. Burning fossil fuels triggers both ETS surrender and FuelEU intensity gap; switching to RFNBOs (renewable fuels of non-biological origin) reduces both in proportion. See /wiki/fueleu-rfnbo-multiplier for how RFNBOs benefit from a multiplier in FuelEU; the same fuels also reduce ETS surrender because their well-to-wake CO2-equivalent (and direct CO2 in MRV reporting) is lower or zero.

The interaction matters for fleet planning. A LNG-fuelled ship in 2026 onward pays ETS on CO2 + CH4 + N2O, including methane slip; the same ship faces FuelEU on its GHG intensity, again counting methane slip. Operators that bought LNG ships for the 2024-2025 ETS window expecting CO2-only treatment will find the 2026 expansion materially raises their cost relative to MGO, especially if their engines have high slip.

BIMCO ETS clause and charter-party allocation

The compliance obligation under EU ETS sits with the shipping company, defined as the registered owner unless the ISM Document of Compliance has been transferred to a different entity. In a typical bareboat or time charter, the registered owner is the shipping company; the charterer pays the bunker bill but does not carry the ETS surrender liability.

This creates a misalignment: the charterer who orders the ship to a slow steaming or eco-routing pattern reduces emissions and so reduces the owner’s ETS bill, but the owner pays the EUAs. Without a contractual mechanism, the charterer captures all the operational decisions and the owner captures all the cost; ECO-incentives collapse.

BIMCO published the ETS Emission Trading Scheme Allowances Clause for Time Charter Parties in 2022, with a revised version in 2023 reflecting the final directive text. The clause establishes:

• The charterer agrees to provide and transfer EUAs corresponding to the ship’s covered emissions during the charter period, calculated against MRV-verified data.
• A monthly reconciliation mechanism for delivering EUAs into the owner’s Union Registry account.
• A price reference mechanism allowing the charterer to deliver in kind (EUAs from its own account) or in cash at the average EEX or ICE settlement price.
• A shortfall remedy with interest and an option for the owner to procure allowances on the market and recharge the charterer.
• Off-hire provisions clarifying that EUA obligations stop accruing during off-hire.

Voyage charters are different. The voyage charterer pays a freight rate that is typically increased to reflect ETS costs in a “bunker and ETS surcharge” line, but the actual EUA delivery sits with the registered owner with no contractual transfer. This works for spot voyages where the surcharge is calculated voyage by voyage; it does not work for long-term contracts of affreightment (CoAs) where forward EUA price exposure becomes material. CoAs increasingly carry a bunker passthrough provision that includes ETS as a separate line item indexed to a published benchmark.

The market has converged on three contractual patterns:

1. Time charter with BIMCO 2022 ETS clause: owner administers, charterer pays in kind or in cash monthly.
2. Voyage charter with bunker and ETS surcharge: owner absorbs and bills as part of freight; common in tanker spot trades.
3. CoA with EUA-indexed passthrough: structured as a separate component of the freight rate, indexed to a benchmark; common in liner shipping and in dedicated CoAs for large industrial shippers.

Union Registry maritime account: opening, surrender by 30 September

EUA allowances are dematerialised electronic instruments held in the Union Registry, the central electronic ledger operated by the European Commission with member-state registry administrators. Shipping companies must open a Maritime Operator Holding Account (MOHA) in the Union Registry to receive, hold and surrender EUAs.

Account opening procedure:

1. The administering authority assigns a shipping company to a member state per Article 18a, based on flag and port of first call data from MRV.
2. The shipping company submits an account opening application to that member state’s national administrator, including legal entity documentation, beneficial ownership disclosure, and authorised representative identification.
3. The national administrator verifies and creates the MOHA in the Union Registry (typically within 20 working days, longer where AML or sanctions checks are required).
4. The shipping company’s authorised representatives obtain login credentials and two-factor authentication tokens.

Each shipping company has one MOHA per administering authority, not one per ship. All ships under that company’s compliance share the same account. Where a company has multiple sub-fleets under different ISM operators, each ISM operator is a separate shipping company for ETS purposes and holds its own MOHA.

Surrender procedure:

1. By 31 March of year n+1, the shipping company submits a verified Aggregated Emissions Report at Company Level to the administering authority, covering all ships in that company’s compliance scope for year n.
2. The administering authority computes the surrender obligation by applying the territorial scope formula and the phase-in coefficient.
3. By 30 September of year n+1, the shipping company surrenders the required number of EUAs from its MOHA. EUAs are “general” allowances fungible with the wider EU ETS market; they are not maritime-specific.
4. The Union Registry records the surrender and the allowances are retired from circulation.

A ship that changes shipping company during the year (e.g., sale, change of ISM manager) splits its emissions between the outgoing and incoming companies on a pro-rata basis from the date of change. Both companies receive a partial-year aggregated report from the administering authority and surrender against their respective MOHAs.

Penalty for non-surrender (EUR 100/tCO2 + restitution)

The non-surrender penalty is set in Article 16(3) of the amended directive at EUR 100 per tonne of CO2-equivalent that should have been surrendered but was not. The penalty has three structural features:

• Inflation indexation: the EUR 100 figure is indexed to the European HICP inflation index from 2024 onward. The published indexation factor for compliance year 2024 is approximately 1.0 (no adjustment); for compliance year 2026 it will be approximately 1.10-1.15 reflecting cumulative inflation.
• Restitution obligation: paying the penalty does not extinguish the surrender obligation. The shipping company must still surrender the missing allowances, on top of the penalty. Failing to surrender after penalty triggers further enforcement including potential refusal of port entry under Article 16(11a).
• Naming and shaming: the Commission publishes annually the list of shipping companies that failed to surrender by the deadline.

Article 16(11a) is the most operationally significant enforcement tool. It empowers member states to refuse entry to ports under their jurisdiction to ships flagged by a shipping company that has been in breach of surrender for two consecutive years. This is the “expulsion order” provision; in practice it has not yet been used as of the 2024-2025 cycle, but it is a real lever.

The penalty rate of EUR 100 per tonne is well above current EUA prices (typically EUR 60-90 per tonne in 2024-2025) and well above realistic mid-range scenarios. The economic logic is to make non-surrender always more expensive than surrender, even for an operator that holds out hoping prices fall. The combination of penalty + restitution means a non-surrenderer pays roughly EUR 100 + EUA price per tonne missed, which is always strictly worse than just buying and surrendering.

There are no exemptions for force majeure or financial distress. A shipping company in insolvency that cannot afford to buy EUAs still owes the surrender obligation; in practice the obligation becomes a claim in the insolvency estate. Member states have flexibility in how they recover the penalty (administrative fine procedures, civil judgments, port-entry refusal) but no flexibility on the penalty amount.

Formula, assumptions, and limits

Formula

The full EUA surrender liability for a shipping company in compliance year $y$ is:

where:

• $L(y)$ is the EUA surrender liability for compliance year $y$, in tonnes CO2-equivalent.
• $k(y)$ is the phase-in coefficient: 0.40 for 2024, 0.70 for 2025, 1.00 for 2026 onward.
• $N_s$ is the number of ships in the company’s compliance scope.
• $N_v(s)$ is the number of voyages performed by ship $s$ in year $y$.
• $f(v)$ is the territorial scope factor for voyage $v$: 1.00 for intra-EU and at-berth, 0.50 for extra-EU EU-touching, 0.00 for pure non-EU.
• $G(y)$ is the set of gases in scope for year $y$: $\{CO_2\}$ for 2024-2025, $\{CO_2, CH_4, N_2O\}$ for 2026 onward.
• $\text{GWP}_g$ is the global warming potential of gas $g$: 1 for CO2, 28 for CH4, 265 for N2O (GWP100 from IPCC AR5 as currently specified).
• $E_{g,v,s}$ is the mass of gas $g$ emitted on voyage $v$ by ship $s$, in tonnes.

Derivation

The formula composes three independent dimensions:

1. Phase-in (year-dependent surrender coefficient).
2. Territorial scope (per-voyage geographic factor).
3. Gas coverage (year-dependent gas set times GWP).

These dimensions multiply because the legal architecture treats them as independent filters. A given tonne of CO2 emitted on an intra-EU voyage in 2024 enters the surrender bill as $1.0 \cdot 1.0 \cdot 0.40 = 0.40$ EUA. A tonne of methane emitted on an extra-EU voyage in 2026 enters as $0.5 \cdot 28 \cdot 1.0 = 14$ EUAs. The compositional structure makes scenario analysis straightforward: change one factor (e.g., phase-in coefficient) and the rest of the formula is unaffected.

Assumptions

The formula assumes:

• MRV-verified data is accurate. Mis-declared fuel consumption or under-reported voyages would understate liability and trigger verifier challenge.
• Voyage classification is unambiguous. Edge cases (refuge ports, STS transfers, transhipment hub diversions) are treated per the implementing regulation, which the formula takes as given.
• GWP values are stable. A future Commission update of GWPs would re-index the methane and N2O components. Formula structure is unchanged but the coefficients would change.
• No double counting with FuelEU Maritime. The formula computes ETS liability independently; FuelEU intensity gap is a separate regime with its own penalty and balance sheet.
• Fungibility of EUAs. The formula assumes the company holds EUAs that can be surrendered; market-purchased EUAs and free-allocation EUAs (which shipping does not currently receive) are treated identically.

Worked example

A medium-size container operator with 12 ships above 5,000 GT in compliance scope reports the following 2025 emissions (CO2 only, since CH4 and N2O enter only from 2026):

• Intra-EU voyages: 80,000 t CO2.
• Extra-EU EU-touching voyages: 240,000 t CO2.
• At-berth in EU: 6,000 t CO2.
• Pure non-EU voyages: 150,000 t CO2 (out of scope, not counted).

Covered emissions:

Phase-in coefficient for 2025: $k(2025) = 0.70$.

Surrender liability:

At an EUA price of EUR 75, the cash cost is EUR 10,815,000, surrendered by 30 September 2026. The same fleet at unchanged emissions in 2026 (with CH4 and N2O entering scope, assume 4% uplift to CO2-equivalent) would owe:

an increase of about 49% in physical surrender, on top of any EUA price movement.

Edge cases and limits

• Mid-year sale: a ship sold from company A to company B on 1 July 2025 splits emissions on a calendar pro-rata; both companies file partial reports.
• Flag change: changing the ship’s flag does not change the shipping company; the same company surrenders. Flag change does not alter the administering authority allocation, which is fixed for two reporting cycles.
• ISM operator change: the new ISM operator becomes the shipping company from the date of the change. Prior-year liabilities remain with the old operator.
• Lay-up: a ship at lay-up at an EU berth still owes at-berth emissions on auxiliary fuel consumed for hotel load.
• Ship sale to non-EU buyer: emissions to date of sale are owed by the seller; voyages after sale to a non-MRV operator are out of scope if the buyer is not a shipping company subject to EU MRV.
• Bunker delivery dispute: where bunker delivery quantity is disputed (e.g., short delivery), the verified MRV figure governs surrender; commercial dispute between shipper and bunker supplier is separate.
• Ice-class boundary: a Baltic ship with IB ice class operating partly in ice and partly in open water in the same voyage applies the ice adjustment only to the in-ice portion.
• Outermost-region operations: voyages between an EU outermost region (e.g., Réunion) and the EU mainland are intra-EU at 100%; voyages between two outermost regions are intra-EU at 100%.
• Cyprus-Malta historical derogation: derogations for transhipment routes through Cyprus and Malta sunset on 31 December 2030; from 2031 these routes are inside at full scope.

Regulatory basis

• Directive (EU) 2023/959 of the European Parliament and of the Council of 10 May 2023.
• Consolidated Directive 2003/87/EC, particularly Articles 3g, 3ga, 3gb, 3gc, 3gd, 3ge, 12, 16 and 18a.
• Regulation (EU) 2015/757 (EU MRV Regulation) as amended by Regulation (EU) 2023/957.
• Commission Implementing Regulation (EU) 2023/2599 (monitoring rules for shipping companies).
• Commission Delegated Regulation (EU) 2023/2849 (administration of shipping companies).
• Commission Delegated Regulation (EU) 2023/2917 (verification activities and accreditation of verifiers).
• Commission Implementing Regulation establishing the list of non-EU container transhipment ports (periodically updated).

Common errors

• Confusing MRV reporting with ETS surrender. MRV reports 100% of covered emissions; ETS surrender applies the phase-in and territorial scope coefficients on top.
• Forgetting at-berth emissions. At-berth fuel for hotel load is in scope at 100% even if the ship performs no voyages in the period.
• Mis-classifying STS transfers. An STS transfer in EU waters is an EU port of call; one outside EU waters is not. Operators sometimes default to “no port of call” and undercount voyages.
• Over-claiming ice-class adjustment. The adjustment applies only to in-ice voyages in defined ice seasons; applying it year-round is a common verifier finding.
• Mis-allocating mid-year ship sale. The pro-rata split on calendar days is mandatory; some operators have allocated by voyage count which is not compliant.
• Treating LNG as CO2-only. From 2026, methane slip enters the scope at GWP100 = 28; ignoring slip will leave a 1-3% under-surrender on LNG-fuelled ships.
• Assuming the BIMCO clause is automatic. The BIMCO 2022 ETS clause must be incorporated by express reference into the charter; without incorporation, allocation rules default to the registered owner bearing the cost.

See also

• /wiki/eu-ets-for-shipping: overview of how ETS applies to shipping.
• /wiki/fueleu-maritime-explained: companion intensity regime.
• /wiki/fueleu-intensity-formula-breakdown: detailed FuelEU intensity formula.
• /wiki/fueleu-compliance-balance-pooling: pooling and banking under FuelEU.
• /wiki/marine-gfs-methodology: IMO GFS framework methodology.
• /wiki/imo-net-zero-framework: IMO global GHG strategy.
• /wiki/imo-dcs-vs-eu-mrv: comparison of IMO DCS and EU MRV.
• /wiki/uk-ets-for-shipping: UK ETS treatment of maritime.
• /calculators/eu-ets-scope: voyage-by-voyage scope assignment.
• /calculators/eu-ets-phase-in: phase-in coefficient and trajectory.
• /calculators/eu-ets-eua-liability: full EUA liability and cost calculation.
• /calculators/eu-ets-pool-surrender: surrender planning across a fleet.
• /calculators/fueleu-compliance-balance: FuelEU balance computation.
• /calculators/fueleu-ghg-intensity: FuelEU GHG intensity.

References

Related calculators

• UK ETS Shipping Liability
• Terminal - Shanghai - Yangshan Phase 1-4
• Ozone-Depleting Substances - Phase-Out Check
• EU ETS - Annual Allowance Cost
• EU MRV to EU ETS Allowance Crosswalk
• EEDI Phase Factor
• Anchor Scope - Chain Length Requirement
• EU MRV Emissions Report

Related formulas

• EU ETS Scope Factor
• EU ETS Phase-in
• EU MRV to EU ETS Allowance Crosswalk
• uk ets shipping
• Terminal - Shanghai - Yangshan Phase 1-4
• Ozone-Depleting Substances - Phase-Out Check
• EU ETS - Annual Allowance Cost
• EU ETS - Allowance Surrender Schedule
• Cable Voltage Drop (3-phase)