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Dec 29, 2022
Lockton P.L. Ferrari

Newsletter 12-22

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:

29th December 2022


  • Following significant losses arising from the conflict, Reinsurers have restrictedP&I Carriers’ (both clubs and Fixed Premium providers) ability to continueproviding War Risk cover for certain trades.
  • The international marine reinsurance markets have therefore imposed anexclusion in respect of certain war risk exposures relating to Russia, Ukraine andBelarus (RUB) that will enter into force on January 01st 2023
  • The restriction is in respect of non-poolable type of cover, and does not apply tomutual entries for P&I and FD&D;
  • All International Group P&I Clubs have been forced to issue notices ofcancellation for those cover that include a war risk element.

The Notice shall run for seven days from 24:00 hours GMT on 24 December 2022.Upon expiry of this Notice at 24:00 hours GMT on 31 December 2022, coverextensions will be automatically reinstated by applying the following wording :

“Excluding all loss, damage, liability, cost or expense:

(a) caused by or arising from or in connection with any Russia-Ukraine conflict and/or anyexpansion of such conflict; or

(b) in any area or territory or territorial waters where Russian armed forces,Russianbacked forces, and/or Russian authorities, are engaged in conflict within theterritories (including territorial waters) of the Russian Federation, Belarus, Ukraine andany disputed regions of Ukraine, the Crimean Peninsula and the Republic of Moldova; or

(c) arising from capture, seizure, arrest, detainment, confiscation, nationalisation,expropriation, deprivation or requisition for title or use, or the restraint of movement ofvessels and cargo in the territories (including territorial waters) of the Russian Federation,Belarus, Ukraine and any disputed regions of Ukraine, the Crimean Peninsula and theRepublic of Moldova.”

Relevant circulars for each Club can be found at following links :

American - Club Announcement
Britannia - Club Announcement
Gard - Club Announcement
Japan - Club Announcement
London - Club Announcement
North of England - Club Announcement
SOP - Club Announcement
Skuld - Issued individual notices for their Members and Assureds
Standard - Club Announcement
Steamship - Club Announcement
Swedish - Club Announcement
UK - Club Announcement
West of England - Club Announcement


  • Cover for Charterers Liability and Damage to Hull will remain in force for those areas (as long as not already excluded from policy trading areas) with the exclusion applying to the War Risk section of both cover lines;
  • Our understanding is that Clubs may consider reinstating War Risk for Charterers liability and Damage to Hull on a case by case basis and for specific voyages only;
  • FDD cover is not affected from a reinsurance standpoint.
  • From a practical point of view any claim relating to an event arising within excluded areas, taking place after the 31.12.2022 will not be covered under war risk section independently whether the Vessel was declared before or after such date


  • War risk elements afforded under fixed Owners entries, both P&I and additionalcovers (such as but not limited to Specialist Operation, Contractual, SOLextensions etc.) will no longer form part of the cover provided beyond Jan 01st2023 : the war risk exclusion overrides the Rules/Terms of Cover and the extent ofcover provided even in case the voyage started before such date.
  • Non-war risks for P&I, FDD and additional covers will remain in place in case ofRussian, Belaraus or Ukranian trading, if not specifically excluded from policytrading limits, sanction limitations or other specific policy terms.


  • Poolable P&I Cover exclude War Risks however mutual cover provided by IGClubs include a “Excess P&I War” of USD 500M. as of today, Excess P&I War riskcover remain in force.
  • We remind you that “Excess P&I War”, as the name suggest, operates in excessof the Hull War cover that is primary for what concern War Risks. P&I Clubsrecommend that Owners maintain in place primary Hull War Cover, inclusive of“P&I War inclusion clause”, with a separate and independent limit for the liabilities,as per market standards. Pls refer to our publications detailing this subject inMarch 22 ( PLF News&Insights 02-22 ) and April 22 ( PLF News&Insights 03-22 )
  • Non-war risks for P&I, FDD and additional covers will remain in place in case ofRussian, Belaraus or Ukranian trading, if not specifically excluded from policytrading limits, sanction limitations or other specific policy terms.


The situation is very fluid and the P&I Clubs and P&I Carriers are endeavoring to work out a solution for their Members and Clients.

We will continue to keep you updated and our team of global marine experts remain ready to assist wherever needed so please do not hesitate to reach out to your local Lockton/P.L. Ferrari representative.


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

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

P.L.Ferrari – A Member of the Lockton Group of Companies

This newsletter is intended solely as an overview of the marine market and does not constitute any form of advice. It is based on sources believed to be accurate at the time of printing andwe cannot be held liable for the omission of any information within the newsletter.

Newsletter 12-22
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