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Zero Carbon Desk

08 – Roadmap to Decarbonisation of the Maritime Sector (EU Level)

21 December 2023

OUTLINE

The purpose of this roadmap is to provide guidance to maritime stakeholders in view of complying with new obligations arising from the implementation of updated EU regulations specifically relevant to the maritime sector.

BACKGROUND

In December 2019, the European Commission (EC) launched the European Green Deal, which aims to set the European Union (EU) on the path to a green transition with the ultimate goal of reaching climate neutrality by 2050 through various policy initiatives. Among those initiatives is the Fit for 55 package which refers to EU’s target of reducing net greenhouse gas (GHG) emissions by at least 55% by 2030. The Fit for 55 package contains a set of proposals to revise and update the EU legislation and to put in place new initiatives in line with EU climate goals.

The maritime sector has not been left behind insofar as several proposals impose new obligations on shipping companies with the aim of reducing GHG emissions. Not only the EU emissions trading scheme (EU ETS) will be extended to maritime transport – including new reporting obligations for shipping companies under the monitoring, reporting and verification maritime regulation (MRV) and the surrendering of EU allowances (EUAs) –, but a new regulation, the carbon border adjustment mechanism (CBAM), has been designed to function in parallel with EU ETS, complementing it for imported goods[1]. In addition, a new regulation on the use of renewable and low-carbon fuels in maritime transport (FuelEU Maritime) was adopted in September 2023 with the aim of increasing consistent use of such alternative fuels and substitute sources of energy in maritime transport[2].

The aforementioned regulations will have – if not already – a significant impact on the maritime sector and impose new obligations on shipping companies. It is therefore of utmost importance for the stakeholders to promptly take all necessary steps and be aware of the upcoming deadlines.

NEW COMPLIANCE OBLIGATIONS IN A NUTSHELL

Under CBAM

From 1 October 2023 until 31 December 2025 (transitional phase), importers of intensive carbon goods have an obligation to submit quarterly reports to the EC containing specific information on the goods imported during each quarter.

By 1 January 2026, CBAM will take full effect which means that the submission of annual declarations and the surrendering of CBAM certificates corresponding to the embedded emissions declared for the preceding year will become mandatory for importers.

Under MRV

From 1 January 2024, shipping companies will have to monitor not only carbon dioxide (CO2), but also methane (CH4) and nitrous oxide (N2O) emissions for ships of or above 5000 GT under their responsibility. In addition, they will have to submit emissions reports both at ship and company levels to an independent accredited verifier and – once such reports have been verified as satisfactory by said verifier – to their administering authority.

The same obligation will apply to offshore ships above 5000 GT as well as offshore ships and general cargo ships between 400 and 5000 GT as of 1 January 2025.

Under EU ETS

By 30 September 2025, shipping companies will have to surrender EUAs to offset their GHG emissions (CO2) reported in 2024 for ships of or above 5000 GT. The share of emissions that must be covered by EUAs will gradually increase each year and CH4/N2O emissions will also need to be covered from 2027:

  • By 30 September 2025: surrendering of EUAs to cover 40% of CO2 emissions reported for 2024;
  • By 30 September 2026: surrendering of EUAs to cover 70% of CO2 emissions reported for 2025;
  • By 30 September 2027 and beyond: surrendering of EUAs to cover 100% of reported emissions (CO2, CH4 and N2O).

The obligation to surrender EUAs to cover all reported emissions will apply to offshore ships of or above 5000 GT from 2027.

Under FuelEU Maritime

FuelEU Maritime implements two main measures with the aim of increasing consistent use of alternative fuels: (i) a limit of the GHG intensity of the energy used on board of ships calling at EU ports and (ii) an obligation to use on-shore power supply (OPS) or zero-emission technology in EU/EEA ports.

By 31 August 2024, shipping companies operating ships of above 5000 GT have to submit to an independent verifier a monitoring plan for each ship indicating the chosen method for monitoring and reporting the amount, type and emission factor of energy used on board.

The first reporting period will run from 1 January to 31 December 2025, which means that shipping companies will have to report all relevant information (incl. port of departure/arrival, amount of each type of fuel consumed at berth and at sea, amount of electricity delivered through OPS) to an independent verifier by 31 January 2026. If the company proves to be compliant with FuelEU Maritime requirements, it will receive a FuelEU document of compliance. From 30 June 2026 onwards, it will be mandatory for all ships calling at an EU/EEA port to carry a valid FuelEU document of compliance.

Finally, from 1 January 2030, containerships and passenger ships over 5000 GT will have the obligation to connect to OPS when moored more than two hours in an EU/EEA port.

KEY STEPS AND DEADLINES

For a detailed rundown of the key steps to be taken by shipping companies and importers of carbon intensive goods and corresponding deadlines, please refer to our attached summary table.


[1] For more information on CBAM, see our alert of 19 September 2023.

[2] For more information on FuelEU Maritime, see our alert of 28 July 2023.

SANCTIONS DESK

Through this Sanctions Desk and thanks to our extensive expertise in shipping, we aim to assist our Clients in complying with the new regulations by providing regular updates and legal analysis on sanctions impacting the shipping industry. Our team is also available to advise maritime operators on the drafting of relevant clauses and to represent them in any disputes regarding sanctions.

Find out more here