EU ETS from a charterers´ view

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Emissions EU ETS

What to do with EU ETS – from a charterers´ view.

From January 2024 emissions taxation in the maritime sector is a reality. The maritime industry is included in the European Union’s Emissions Trading System (EU ETS). On top of this, numerous other national ETS schemes are on the brink of release, so it is fair to say that emissions taxation has come to stay.

There has been a lot of news and numbers directed at owners, who will offset their vessels’ emissions with emission allowances at the end of each year from 2024.

Emissions allowances are bought on the free market and many owners have begun doing so already in the hope that they can pay a lower price than they could next year or to cover cargoes already in the book.

However, for vessels not operated by the owner, which is the case for large parts of the bulker and tanker industry, the owner may transfer the responsibility of the allowances to the charterer as part of the contract. This will involve a transfer of emissions allowances from the charterer to the owner, either during the charter period or upon completion.

 

BIMCO Clause

BIMCO have proposed a clause outlining a way to transfer emission allowances during a charter period. This involves the owner monitoring the actual emissions for past voyages under the charter party period as well as estimating allowances needed for the remainder of the charter party period.

By now, this should be well within the owners’ capabilities with them having had the responsibility to report emissions numbers since the EU introduced MRV in 2018.

But for many charterers, this marks the beginning of a new era of accountability towards the owners.

 

This requires learning to navigate an added level of complexity in the charter party negotiations and possibly adding an in-house or outsourced emissions allowance desk to handle the purchasing and transfer of allowances.

On the systems side, the route optimization software of choice needs to accommodate accurate estimates of emissions relevant under the EU ETS to correctly calculate the cost of performing a given voyage.

Further, a good data collection system can help present an overview of historic emissions relevant to ETS, which needs to be offset by allowances.

Article update 9/7-23

In our Valid Voyage solution, we now offer the possibility to calculate the impact of EU ETS on any planned voyage given a CO2 allowance cost.Our software calculates the estimated total ETS cost and provides the operator with a full overview of the predicted result.
This adds to the already comprehensive result prediction, which includes the cost of time, cost of fuel, and CII impact of performing a certain voyage.

 

Written by Christian Råe Holm, Head of Performance Management

 

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