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Zero Carbon Desk

09 – A Focus on BIMCO ETS Clauses

Author: Camilla Del Re | 31 January 2024

OUTLINE

On 30 January 2024, the European Commission published the implementing act [1] listing the administering authority for each shipping company subject to compliance obligations under the EU Emissions Trading System (ETS). Thus, shipping companies are now able to request the opening of a maritime operator holding accounts (MOHA) to their assigned administering authority – which will allow them to surrender carbon allowances.

At the same time, the allocation of costs arising from the surrendering of allowances shall be discussed between contractual parties. After drafting the ETS Allowances Clause for Time Charter Parties (see our Zero Carbon Desk – Publication no. 02), BIMCO has released three voyage charter parties clauses, and a clause for ship management contracts, which can be used in relation to EU ETS as well as with any other emission scheme.

ETS – EMISSION SCHEME FREIGHT CLAUSE FOR VOYAGE CHARTER PARTIES 2023

Under the Emission Scheme Freight Clause, the freight rate agreed between the Owners and the Charterers includes all costs arising from the surrender of emission allowances for the voyage performed under the Charter Party. The Charterers will therefore be the ones effectively paying for the emission allowances, whereas the Owners will remain responsible for surrendering the appropriate number of emission allowances and for compliance with the relevant emission scheme.

If the vessel releases more emissions than expected due to the Charterer’s breach of the contract (e.g., as clarified in the Explanatory Notes, if vessel is detained at fault of the Charterers), Owners will be able to recover from Charterers any costs arising from the surrender of additional allowances for the emissions released during the period of breach.

ETS – EMISSION SCHEME SURCHARGE CLAUSE FOR VOYAGE CHARTER PARTIES 2023

The Emission Scheme Surcharge Clause provides that the Charterers shall pay an emission scheme surcharge (i.e. the agreed cost corresponding to the vessel’s emissions) to the Owners. Such surcharge reflects the outcome of a commercial agreement between the parties and aims to compensate the Owners for the costs of surrendering emission allowances for the voyage. Again, the Charterers will be the ones effectively paying for the emission allowances, and the Owners will remain responsible for surrendering the appropriate number of emission allowances and for compliance with the relevant emission scheme.

The Charterer shall pay the surcharge either by the date on which freight is due or within a specified number of days (14, if not otherwise specified) after the vessel’s departure from the load port, whichever is sooner.

Upon receipt of the surcharge, Owners shall have no further right of recourse against the Charterers in respect of any costs arising from the surrender of emission allowances, unless they result solely from the Charterers’ breach of contract. On the contrary, if Charterers fail to pay the surcharge, it shall be deemed as non-payment of freight under the charter-party.

The clause includes an optional subclause (g) which allows for a price adjustment where the spot price for emission allowances has changed over time. This provision can assist parties in mitigating the risk of agreeing a surcharge that does not reflect the market position by the time it is transferred.

ETS – EMISSION SCHEME TRANSFER OF ALLOWANCES CLAUSE FOR VOYAGE CHARTER PARTIES 2023

Under the Emission Scheme Transfer of Allowances Clause, the Charterers will be the ones transferring emissions allowances to the Owners for the voyage, and the Owners will remain contractually responsible for surrendering the appropriate number of emission allowances.

The clause provides for two alternatives, as the parties may either insert the agreed number of emission allowances in the contract or leave it blank.

In the first case, the agreed quantity of emission allowances will not be subject to any adjustment due to an increase or decrease of the number of emission allowances actually used for the performance of the voyage. This can be a commercial choice of the parties.

In the second case, if the quantity is left blank, the Owners shall notify the Charterers in writing of the estimated quantity of emission allowances and, by the date on which freight is due or within a specified number of days (14, if not otherwise specified) after the vessel’s departure from the load port, the Charterers shall transfer the estimated quantity of allowances to Owners. After discharging of the cargo, the Owners shall notify the Charterers in writing of the number of emission allowances actually used for the performance of the voyage, and there will be an adjustment mechanism.

ETS – SHIPMAN EMISSION TRADING SCHEME ALLOWANCES CLAUSE 2023

This clause is applicable to ship management contracts and is designed to allocate the cost and responsibility for obtaining, transferring, and surrendering emission allowances between Owners and a Ship Managers.

Under letter a), the clause provides for the situation in which Owners are the responsible party for compliance with the relevant emission scheme. In such case, the Managers shall provide the Owners with emission data in a timely manner and/or at regular intervals.

Under letter b), the clause provides for the situation in which Managers are the responsible party for compliance. According to Regulation (EU) 2023/2599, whenever the parties agree that the Managers will assume the responsibility for the compliance with the ETS, they shall provide the relevant administering authority with a signed document, clearly indicating that the Managers have been mandated by the Owners with compliance obligations. In such case, the Managers shall provide the Owners with a written estimate for the following month; the Owners shall transfer the estimated emission allowances; and there will be a running reconciliation and adjustment of allowances for previous months. The timeframe for the transfer of emission allowances is left to the parties. As clarified by BIMCO’s Explanatory Notes, Owners may consider a timeframe that enables a flow-through of allowances, i.e. time to collect/receive the allowances from charterers before these have to be transferred by the Owners to the Managers.


[1] Cf. Commission implementing decision (EU) 2024/411 of 30 January 2024.

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