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Oct 22, 2021
Lockton P.L. Ferrari

General Increase Bulletin No. 3/21

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1st January 2024.

The EU ETS is limited by a 'cap' on the number of emission allowances. Within the cap, companies receive or buy emission allowances, which they can trade as needed. The cap decreases every year, ensuring that total emissions fall.

Each allowance gives the holder the right to emit:

  • One tonne of carbon dioxide (CO2), or;
  • The equivalent amount of other powerful greenhouse gases, nitrous oxide (N2O) and perfluorocarbons (PFCs).
  • The price of one ton of CO2 allowance under the EU ETS has fluctuated between EUR 60 and almost EUR 100 in the past two years. The total cost of emissions will vary based on the cost of the allowance at the time of purchase, the vessel’s emissions profile and the total volume of voyages performed within the EU ETS area. The below is for illustration purposes:
  • ~A 30.000 GT passenger ship has total emissions of 20.000 tonnes in a reporting year, of which 9.000 are within the EU, 7.000 at berth within the EU and 4.000 are between the EU and an outside port. The average price of the allowance is EUR 75 per tonne. The total cost would be as follows:
  • ~~9.000 * EUR 75 = EUR 675.000
  • ~~7.000 * EUR 75 = EUR 525.000
  • ~~4.000 * EUR 75 * 50% = EUR 150.000
  • ~~Total = EUR 1.350.000 (of which 40% is payable in 2024)
  • For 2024, a 60% rebate is admitted to the vessels involved. However, this is reduced to 30% in 2025, before payment is due for 100% with effect from 2026.
  • Emissions reporting is done for each individual ship, where the ship submits their data to a verifier (such as a class society) which in turns allows the shipowner to issue a verified company emissions report. This report is then submitted to the administering authority, and it is this data that informs what emission allowances need to be surrendered to the authority.
  • The sanctions for non- compliance are severe, and in the case of a ship that has failed to comply with the monitoring and reporting obligations for two or more consecutive reporting periods, and where other enforcement measures have failed to ensure compliance, the competent authority of an EEA port of entry may issue an expulsion order. Where such a ship flies the flag of an EEA country and enters or is found in one of its ports, the country concerned will, after giving the opportunity to the company concerned to submit its observations, detain the ship until the company fulfils its monitoring and reporting obligations.
  • Per the EU’s Implementing Regulation, it is the Shipowner who remains ultimately responsible for complying with the EU ETS system.

There are a number of great resources on the regulatory and practical aspects of the system – none better than the EU’s own:

21nd October 2021

P&I Mutual entries

• No declared general increase with Members continuing to be underwritten individually, the Board has however targeted a 12.5% increase on expiring ETC premium.

Minimum deductibles will be increased to the following levels.
• Crew USD 6,000
• Cargo USD 18,500
• All Others USD 12,500

FDD Mutual entries

No declared general increase but Members’ rates will be adjusted to reflect their individual claimsrecords and risk profiles to achieve a 15% increase on expiring ETC premium.

Britannia is the third club to announce their general renewal requirements for the 2022/23 policyyear following their recent Board meeting held this week.
Commenting on the Board decisions for renewal the club notes, ”a very challenging claims environment, particularly for Pool claims, which are shared across theInternational Group of P&I Clubs, as well as continued pressure on rates. The combined effect hasresulted in a projected deficit for the 2021/22 policy year higher than originally forecast. ”

“ Members’ individual rates will be adjusted to reflect their claims record and risk profile, as well asany changes in the cost of the International Group Reinsurance Programme. Britannia will undertakea technical based renewal of its membership to promote sustainable premiums and restoreunderwriting balance. Whilst there is no declared general increase with Members continuing to beunderwritten individually, the Board has targeted a 12.5% increase on Britannia’s ETC (P&I). ”

Finally, the club has advised,
“The Board has agreed a further capital distribution of USD25 million to mutual P&I Members withships on risk at midnight (BST) on 19 October 2021 (using the same method of calculation for eachMember’s share as for prior distributions).” whilst adding a closing comment on this development,“Britannia’s capital position remains strong, allowing for this further capital distribution. However,this is different from rates, which need to increase given the underwriting deficit.”

This Newsletter, and our information archive, can also be accessed at

P.L. FERRARI & CO S.r.l.

General Increase Bulletin No. 3/21
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