The EU Emissions Trading System (EU ETS) represents a crucial cap-and-trade mechanism designed to curtail greenhouse gas (GHG) emissions by establishing a cap on GHG emissions for specific economic sectors. This system functions by allocating a finite quantity of EU Allowances (EUAs) for trading annually, with this limit diminishing over time to align with the EU’s ambitious goals of slashing GHG emissions by 55% by 2030 compared to 1990 levels, and achieving net zero emissions by 2050.

Each EUA empowers companies with the right to emit an amount of GHG emissions equivalent to the global warming potential of one tonne of CO2. In light of this, the EU has extended the scope of the EU ETS to encompass the shipping sector starting from 2024, marking a significant milestone in its environmental efforts. This expansion entails a gradual three-year incorporation period, where the share of emissions covered escalates from 40% in 2024 to 70% in 2025, reaching a full 100% by 2026. This adjustment affects cargo and passenger vessels exceeding 5000 GT from 2024 and extends to offshore ships over 5000 GT starting from 2027, initially focusing on carbon dioxide emissions before broadening to methane and nitrous oxide from 2026.

The inclusion of shipping within the EU ETS framework mandates that shipping companies, for vessels traveling to or from ports in the EU or EEA, secure enough EUAs to cover their GHG emissions and submit these allowances annually to regulatory authorities. This process is supported by the EU MRV regulation, which requires the monitoring, reporting, and verification of GHG emissions on a yearly basis. Such data collection aids in determining the necessary amount of allowances to surrender.

Recognizing the financial burdens and contractual complexities this could impose on shipping companies, including potential price adjustments and the management of tax cash flows across the value chain, SeaPay® is proactively incorporating these considerations into the software solutions we develop for ship owners. Our goal is to offer a robust platform that not only facilitates compliance with the evolving EU ETS regulations but also ensures a seamless integration of emissions performance data for voyage verification. This initiative underscores SeaPay®’s commitment to supporting our clients through the transition, enabling efficient and compliant operations in the face of stringent environmental regulations.