The UK's carbon trading scheme (UK ETS) will be extended to domestic maritime activities starting from July 1, 2026. This scheme allows charterers and traders to consider these regimes in their planning and contracts, following similar schemes in the European Union and actions by the International Maritime Organization.
Scheme Specifications and Requirements
This scheme is initially domestic and activity-based, applying to vessels with a capacity of 5000 GT and above on voyages between UK ports, including round trips and UK port activities. UK voyages abroad do not include UK port emissions and only their port emissions are subject to this scheme. Emissions related to domestic UK voyages and UK port activities are subject to 100% surrender requirements.
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On voyages to Northern Ireland, all emissions are monitored and reported, but a 50% discount on surrender requirements applies. This scheme covers carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O) based on the “from tank to wake” standard. The impact of these requirements at anchor depends on the position and boundary of the port.
Responsibilities and Costs
Maritime operations under supervision are typically the responsibility of the registered owner. If the registered owner does not fulfill the duties of an ISM company, UK ETS responsibilities may be transferred to the ISM company. This requires a legal agreement. Additionally, the costs related to permits can be passed on to the charterer, and if these permits are not secured, the owner will still be liable to the responsible authorities.
Charterers must differentiate between UK allowances (UKAs) and European Union allowances (EUAs), as these are not interchangeable. At the same time, the FuelEU Maritime scheme regulates greenhouse gas intensity on an annual basis and uses compliance balances instead of ETS allowances.
Charterers should avoid an unspecified “pollution cost” and clearly define the terms related to calculation and settlement in the charter contract. In time charters, costs related to fuel and permits are usually the responsibility of the charterers, and contract clauses should include detailed information about permit costs and specific conditions in cases of deviation or repair.
Importance of Data and Verifications
Charterers typically do not have legal monitoring control and require contractual access to fuel data, pollutant factors, and voyage and port allocations. The first UK report for the period from July 1 to December 31, 2026, must be submitted by March 31, 2027. UK allowances for the years 2026 and 2027 must be surrendered by April 30, 2028. These timelines should be reflected in contracts.
Charterers and traders must proactively respond to this scheme and consider the above to avoid legal and financial liabilities.
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