The idea in one sentence
Shipping has been pulled into the same cap-and-trade market that industrial installations and aviation have used for years. Every tonne of CO₂ emitted on a covered voyage must be offset by surrendering one EU Allowance (EUA) - a tradeable instrument whose price reflects the market cost of a tonne of avoided emissions.
Who is in scope
- Commercial vessels ≥ 5,000 GT that perform cargo or passenger transport.
- Offshore vessels ≥ 5,000 GT (supply, DSVs, etc.) are phased in from 2027, along with general cargo and offshore between 400 – 5,000 GT (MRV-only from 2025).
- Fishing vessels, warships, and government non-commercial ships are out.
- It’s the registered owner (or ISM company if different, per declaration) that holds the compliance obligation - not the charterer - though charter contracts almost always now push the cost through.
Which voyages count
A “voyage” is anchor-to-anchor between two commercial ports. The geographical scope is:
| Voyage | ETS share |
|---|---|
| EU/EEA port → EU/EEA port | 100 % |
| EU/EEA port → non-EU port (extra-EU) | 50 % |
| Non-EU port → EU/EEA port (extra-EU) | 50 % |
| Non-EU port → non-EU port | 0 % |
Cyprus and Malta got a temporary derogation for some trades; it’s a tiny sliver of flows.
Phase-in
The obligation ramps up:
| Year | % of covered CO₂ that must be surrendered |
|---|---|
| 2024 | 40 % |
| 2025 | 70 % |
| 2026 | 100 % |
| 2026 onwards | 100 % plus CH₄ and N₂O added from 2026 |
So for 2024 emissions (surrendered in September 2025), a ship that emitted 10,000 t of covered CO₂ surrenders 4,000 EUAs.
The maths
EUA liability (2024) = CO2_covered_t × 0.40
EUA liability (2025) = CO2_covered_t × 0.70
EUA liability (2026+) = CO2_covered_t × 1.00
Cost = EUA liability × EUA_price
CO₂_covered_t is derived from MRV fuel reporting × Cf factors (MEPC.364(79)) × the 100/50/0 % scope weight per voyage. EUA prices have traded €60–€110 per tonne since 2023; a 50,000 t fuel operator under full 100 % scope would be looking at ~€9–€16 million per year at those prices.
Who holds the allowances
Ship-specific accounts are held in the EU Emissions Trading System Registry; administered by the flag-of-MRV-responsibility member state (assigned once, usually the member state of the ship’s port-of-first-call in the first two reporting years). The shipping company (not the owner of each individual ship, if different):
- Receives the verified emissions report by 31 March.
- Has until 30 September of the following year to surrender the required number of EUAs.
- Faces a €100 per missing EUA penalty plus having to surrender the allowances anyway, plus naming/shaming.
How to reduce the bill
The only levers are fewer tonnes of covered CO₂ or cheaper EUAs:
- Burn less fuel - slow steaming, hull cleaning, WHR, weather routing. Same levers as CII.
- Switch to low-Cf fuels - LNG’s Cf is 2.75 vs VLSFO’s 3.114, a 12 % reduction on the ETS liability per tonne of fuel for the same energy delivered.
- Carbon-neutral fuels - RFNBOs and bio-fuels have a Cf of zero under ETS (physical tailpipe carbon is considered biogenic).
- Re-routing - swap an EU-to-EU leg for two extra-EU legs if commercially viable (drops 100 % → 50 % scope).
- Pass-through clauses - BIMCO’s ETS-EUA Clause allocates cost to the charterer in time-chartered trades.
Interactions with other regimes
- FuelEU Maritime (from 2025) is a separate fuel-intensity obligation with its own penalty regime. Zero-Cf fuels under ETS still carry a WtW intensity under FuelEU, so RFNBO credits help one but not the other.
- IMO DCS and EU MRV feed the same fuel/distance data, but MRV fuel is reported as CO₂ and voyage-attributed; DCS is annual and ship-total. Reporting once is enough if both systems recognise the verifier.
- CII measures operational intensity; ETS charges for total emissions. A ship can be A-rated and still have a big ETS bill if it simply sails a lot.
How to compute your ship’s liability
Try our EU ETS Liability calculator - enter annual covered CO₂, pick the reporting year (so the 40/70/100 % factor is set automatically), and it returns EUA count and bill at the current spot price. The ETS Scope calculator helps you attribute voyage CO₂ to the 100 / 50 / 0 % buckets before aggregating.