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Nov 9, 2021
Lockton P.L. Ferrari

General Increase Bulletin No. 8/21

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:

9th November 2021

P&I Mutual entries

  • A +5% general increase.

  • FDD Mutual entries

  • A +5% general increase.

  • The club analysis of the 2021 policy year has highlighted a level of claims arising from COVID-19 significantly higher than had been anticipated. Claims being made by clubs to the International Group Pool have also continued at a very high level in 2021. Claims otherwise have been broadly in line with expectations, with frequency having returned to pre-pandemic levels. The half year investment return was reported as 2.9%. Since then, the club has seen increased market uncertainty. As such, the Club is treating ongoing investment return expectations with caution.

    Looking forward to the 2022 policy year the club in summary concludes,

    “Given the number of COVID-19 outbreaks being experienced we must expect that claims frequency will remain high for the foreseeable future. We also expect that, in the short term at least, inflation will be a more significant factor, with overall claims costs increasing due to higher charter rates, commodity prices and social inflation all contributing to overall claim costs.”

    The statement from the recently concluded Board meeting sums up the club approach moving forward into 2022,

    “They remain committed to the policy of seeking to ensure that the financial stability of the Club is maintained by underwriting to a breakeven position and therefore determined that a 5% General Increase in premiums would be applied to all covers. This will be inclusive of any increases applied to the International Group reinsurance programme.”

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

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

    General Increase Bulletin No. 8/21
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