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EU ETS can cost the shipping industry billions

ITIC suggests EU ETS will cost the shipping industry billions

 

International Transport Intermediaries Club (ITIC) has forecasted that the cost of the European Union’s (EU’s) new Emissions Trading Scheme (ETS) to the shipping industry could be in the billions.

The extended EU ETS, which comes into force on 1 January 2024, will set an annual absolute limit on emissions of greenhouse gases (GHG) for vessels of 5,000 gt and above calling at EU ports. However, its implementation is creating tensions between shipowners and charterers, particularly surrounding the language within charter agreements to ensure a fair distribution of costs and legal risks.

Despite these challenges, Robert Hodge, General Manager at ITIC, noted that it is vital that ship managers take necessary due diligence to ensure any of these risks are mitigated.

“Ship managers will have an important role in managing the scheme for their owners. It is, therefore, vital that ship management agreements set out the responsibilities and liabilities for doing so. The EU ETS is likely to cost the industry billions in extra fees so ship managers and charterers should assess every aspect of the costs and legal risks associated with the scheme to ensure they are not left in a financial precarious position,” Hodge noted.

ITIC’s warning comes on the back of the most recent meeting of BIMCO’s documentary committee, which includes ITIC and other shipping stakeholders. During the meeting, BIMCO adopted a groundbreaking ETS allowances clause for its ship management agreement, SHIPMAN, and three ETS clauses tailored for voyage charter parties. These clauses were crafted to facilitate compliance with evolving regulations, offering a strategic approach to navigating the changing nature of carbon emissions in the maritime sector.

The EU ETS comes as a result of the increasing regulatory landscape imposed by the International Maritime Organization (IMO) and the EU when it comes to reducing GHG for vessels transiting European waters and docking at European ports.

The most recent updates to the BIMCO SHIPMAN Emission Trading Scheme Allowances Clause 2023 ensure that the costs and responsibilities for obtaining, transferring and surrendering emission allowances for ships operating under an emission scheme in a ship management context.

This article is shared by courtesy of ITIC www.itic-insure.com

For more articles about ETS, click here.

Narjiss Ghajour

Editor-in-Chief of Maritime Professionals
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