The shipping phase-in schedule and the surrender duty that stays behind when costs move (EU Directive 2003/87)

Bringing the EU ETS into shipping left companies with three questions to answer: which emissions are covered, how much has to be surrendered, and whether the cost can be moved by contract. Directive 2003/87 answers each in a different provision, and the last answer is only half a yes.

Coverage turns on where each voyage begins and ends

1. The allocation of allowances and the application of surrender requirements in respect of maritime transport activities shall apply in respect of fifty percent (50 %) of the emissions from ships performing voyages departing from a port of call under the jurisdiction of a Member State and arriving at a port of call outside the jurisdiction of a Member State, fifty percent (50 %) of the emissions from ships performing voyages departing from a port of call outside the jurisdiction of a Member State and arriving at a port of call under the jurisdiction of a Member State, one hundred percent (100 %) of emissions from ships performing voyages departing from a port of call under the jurisdiction of a Member State and arriving at a port of call under the jurisdiction of a Member State, and one hundred percent (100 %) of emissions from ships within a port of call under the jurisdiction of a Member State.

Voyage	Rate applied
Departing a port of call under Member State jurisdiction, arriving outside it	50%
Departing a port of call outside it, arriving under Member State jurisdiction	50%
Departing and arriving at ports of call under Member State jurisdiction	100%
Emissions within a port of call under Member State jurisdiction	100%

The axis of the judgement is the voyage, not the ship. One ship moves between several rates over a year. So what the port of departure and the port of arrival were, voyage by voyage, feeds straight into the calculation.

The surrender percentage climbed over three years

Year the verified emissions are reported for	Percentage to surrender
2024	40%
2025	70%
2026 and each year thereafter	100%

What happens to the gap during the climb is in the provision too.

Where fewer allowances are surrendered compared to the verified emissions from maritime transport for the years 2024 and 2025, once the difference between verified emissions and allowances surrendered has been established in respect of each year, an amount of allowances corresponding to that difference shall be cancelled rather than auctioned pursuant to Article 10.

Allowances corresponding to the difference are cancelled rather than auctioned. The share not surrendered during the phase-in is kept from flowing back into the market.

The surrender deadline is 30 September each year. Article 12 of the Directive applies the same date to shipping companies as to installation operators and aircraft operators.

The cost can be moved by contract

Member States shall take the necessary measures to ensure that when the ultimate responsibility for the purchase of the fuel, or the operation of the ship, or both, is assumed by an entity other than the shipping company pursuant to a contractual arrangement, the shipping company is entitled to reimbursement from that entity for the costs arising from the surrender of allowances.

The condition is that another entity assumes, under a contractual arrangement, ultimate responsibility for the purchase of the fuel, or for the operation of the ship, or both. The shipping company is then entitled to reimbursement from that entity for the costs arising from the surrender.

What the Member States have to do is also worth reading: take the measures necessary to secure that entitlement. This is not a recommendation that such a clause be included in contracts but a requirement that the entitlement actually work.

The obligation itself does not move

‘Operation of the ship’ for the purposes of this Article means determining the cargo carried or the route and the speed of the ship. The shipping company shall remain the entity responsible for surrendering allowances as required under Articles 3gb and 12 and for overall compliance with the provisions of national law transposing this Directive.

Two things sit in one paragraph. First, operation of the ship for this purpose means determining the cargo carried or the route and the speed of the ship. Look at where that decision sits in the charter.

Second, the entity responsible for surrender remains the shipping company. Holding an entitlement to reimbursement does not move the surrender duty. Member States have to ensure that shipping companies under their responsibility comply with the surrender obligations, notwithstanding their entitlement to be reimbursed by the commercial operators.

Monitoring and reporting run on the MRV Regulation

The administering authority ensures that a shipping company under its responsibility monitors and reports the relevant parameters during a reporting period and submits aggregated emissions data at company level. The basis for that is Chapter II of Regulation 2015/757.

Which means the data already being produced for MRV becomes the input for surrender. The two regimes do not ask for separate aggregations.

Worth confirming

The passages above come from the consolidated text of Directive 2003/87 as at 1 March 2024. Who the administering authority is, and what shape the national transposition gave the reimbursement entitlement, differ by country. Which row of the table above each voyage falls in, where the decision on route and speed sits in the charter, and whether a reimbursement clause is actually in the contract are where the actual judgement starts.