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Sep 21, 2021
Lockton P.L. Ferrari

Newsletter 05-21

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:

Piracy in Indian water –High Risk Area reduced

On 17 August 2021, BIMCO, ICS, Intercargo, Intertanko and OCIMF announced anagreement to reduce the boundaries of the piracy High Risk Area (HRA) in the IndianOcean.

The geographic changes have taken effect from 1 September 2021 and have consequentlyreduced the HRA boundaries to the Yemeni and Somali Territorial Seas and the EEZ in itseastern and southern reaches.

The new coordinates of the HRA are clearly indicated in the attached joint press release ofthe above global shipping and oil industries.

The reduction of the HRA is a result of a downward trend in Somali piracy, though allvessels transiting these waters must continue to remain vigilant and conform to therecommendations in the latest industry Best Management Practices. Therefore, all shipsare advised to register with Maritime Security Centre Horn of Africa (MSCHOA) andreport to the United Kingdom Maritime Trade Operations (UKMTO) prior to entering theregion.

Despite this reduction the IMB (Piracy Reporting Centre) warns that Somali pirate groupsstill have the capacity to carry out attacks in the Somali basin and wider Indian Ocean.

HRA is only relating to the implementation of BMP measures and does not coincide withthe listed areas indicated by Joint War Committee (see encl.JWL027LA) affecting the WarRisks insurance.”

Our teams at P.L. Ferrari office’s are always ready to assist you for any type of additionalinformation you may need.

This newsletter, our publication archive and all of our colleagues’ contact details can alsobe accessed through our website at

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

Newsletter 05-21
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