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Nov 8, 2021
Lockton P.L. Ferrari

General Increase Bulletin No. 6/21

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:

8th November 2021

P&I Mutual entries

  • No general increase ordered.

  • FDD Mutual entries

  • No general increase ordered.

  • The club notes that after a long period of a benign claims experience and corresponding reduction in premium levels, the last years have seen an increase in the severity of claims. This has been accompanied by a stagnation in the reduction in claims frequency. At half year stage 2021 the club saw the results having been negatively affected by major claims falling within the International Group Pool, a continued impact of COVID-19, and an increase in their own claims. A situation however which has improved since 20 August.

    Following the recent Board meeting it has been decided that premiums will have to be increased for P&I for the 2022 policy year to achieve a balanced underwriting result for owners P&I going forward. As with the previous renewal there will be no general increase applied across the portfolio. Instead, individual Members’ rates will be adjusted to reflect their risk profile and claims record. As a closing comment to their renewal circular they comment, “as a result of the negative claims development, Members can expect an increase in the ETC for owners mutual P&I at the 2022 renewal.”

    In consideration of Gard group’s current capital situation, the Board has concluded to allow an Owners’ General Discount of 5% on the agreed ETC mutual premium for the 2022 policy year.

    In common with other clubs of the International Group the expectation is that the reinsurance rates for the International Group GXL reinsurance programme with increase on renewal. The increases will be passed on to Members.

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

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

    General Increase Bulletin No. 6/21
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