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Oct 7, 2021
Lockton P.L. Ferrari

Newsletter 06-21

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:

Bulkers carrying containers; operational, contractual andinsurance considerations

7th October, 2021


Increasing demand for the shipment of containers has generated interest in,and the utilisation of, non-cellular or specifically designed ships for theirtransportation: whilst modern safety and loss management techniques canbe applied to reduce associated operational risks, there are a multitude ofconcerns and considerations related to the subsequent change of userequired for the carriage of containers by these ships, which include bulkcarriers and general cargo ships.

We will address the three main categories of such considerations below:

1. Operational
2. Contractual
3. Insurance

The adaptions required to convert non-cellular ships to load, carry anddischarge containers effectively, safely and legally are complex and there isno one exhaustive check list to be referred to, however we hope that this mayconstitute a starting point for anyone with interest in the requirements andprovide a launch pad for the required conversations with the interested andnecessary parties.

Operational Considerations

The main operational considerations include the following:


The risks associated with shipping containers are high, even when a ship isspecifically designed to service the needs of their carriage (understanding ofthese risks and how to mitigate them for non-cellular ships is therefore of utmost importance - the recall of several large incidents involving cellularcontainer ships will be easy for most readers of this newsletter).

Some specific considerations and the related regulations and requirementsare briefly below discussed:

  1. Seaworthiness (all related Class and statutory requirements must besatisfied)
  2. Ship’s structure and strength:
  3. - The allowable load density can be increased by reinforcements,subject to approval by Class
  4. - All welding works must be carried out by a Class-approved welder
  5. - Stability analysis:
  6. The vessel must comply with stability and longitudinal strength criteria
  7. The ship’s manuals must be updated
  8. Loading computer systems may also need to be updated
  9. - Cargo securing/care:
  10. CSS code compliance is required
  11. CSM must be updated and approved to the satisfaction of both Class and the flag state
  12. Safe access to cargo is required for monitoring at sea and managing securing arrangements during loading and discharging
  13. Operational matters and emergency response plans should be incorporated into the vessel’s SMS
  14. Twist locks and lashings may be required and must be appropriate to the intended use
  15. - Firefighting capabilities (FFA): The carrying of dangerous goodsmust be done so in compliance with the IMDG code and additionalequipment may be required
  16. - Crew (SMS, EMS, MFAG)
  17. - Weather and environmental considerations Exposure of deck cargo to wind and ice
  18. Statutory and classification:
  • - Flag state requirements: compliance with regulation such asSOLAS and COLREG
  • - Classification Society requirements: the vessel may need to bereclassed and there will be a multitude of requirements andregulations to be complied with

  • It is worth noting that any changes may need to be verified by the externalISM audit of the office and vessel and Class may furthermore require asurvey to reconfirm the ship’s class.

Contractual Considerations

  1. Bills of lading:
  2. - Some contracts of carriage may be adequate, however (if thecontainers are to be carried on deck) the bill of lading must beproperly remarked so that the Owners’ liability is excluded and therisk therefore lies with the shipper.
  3. - The clubs suggest adequate wordings for inclusion in bills oflading.
  4. Charter parties:

- Owners should check if container carriage is excluded under theterms of the charter party as usually a standard c/p form is unlikelyto be suitable without substantial amendments.

Insurance Considerations

The complexity of the arrangements required to effectively carry containerson non-cellular container ships generate the possibility of prejudicingOwners’ P&I cover, primarily through the material change of risk that may begenerated through such arrangements. It is therefore important that we arenotified well in advance so that we may discuss with the Club anyrequirements to avoid prejudicing cover (in some circumstances, anadditional cover may be necessary).

Additional Notes

It is of fundamental importance that the updating, approval and revision of alldocumentation and requirements is completed prior to loading for a multitudeof reasons, including those that have above been mentioned.

It should be noted that if the containers are to be carried for a single voyage,as opposed to on a more regular or permanent basis, the impact on therequirements varies, such as an exemption letter being available from Class,rather than the requirement for reclassification.

Whilst the above list of considerations is not exhaustive, it should form astarting point from which the relevant requirements can be discussed withP.L. Ferrari, Class society and flag state.

This newsletter, and our information archive, can also be accessed

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

Newsletter 06-21
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