Lessons learned from the first year of EU ETS

According to OceanScore, although the first year of the EU ETS is not yet complete, many are already looking ahead to March 2025, when verified MRV reports will dictate the EU Allowances (EUAs) to be surrendered. This deadline, along with the September 2025 EUA surrender date, leaves nine more months of uncertainty for the industry. With year-end approaching, it’s an ideal time to reflect on the lessons from this first year and prepare for the road ahead. The lessons learned include: 

#1 Data challenges

• System readiness and automation gaps: Shipping companies and verifiers struggled with system readiness for EU ETS. A lack of harmonized data formats, automation, and standardized APIs results in inefficiencies. Odd errors in reporting systems and inconsistent data formats highlight the need for standardized practices.

• Double charging for data services: Some service providers attempted to charge shipping companies twice—once for the service itself and again for sharing data via APIs. The industry has largely resisted this practice, but continued vigilance is needed.

• Discrepancies between commercial and MRV voyages: Significant differences between commercial voyage definitions and MRV reporting requirements have created challenges, particularly for voyage charter agreements. These differences complicate commercial settlements and hinder efficient compliance.

• Technical off-hire reporting: Off-hires need to be deducted when invoicing charterers for EUAs, but off-hires are often not verified, delaying negotiations and settlements. Improved reporting frameworks could support more seamless compliance.

#2 Commercial challenges

• Transparency in transactions: Transparency has become a major concern in managing EUAs. Invoicing for EUAs is labor-intensive, with varying formats, request frequencies, and interim statements complicating the process. Many companies struggle to track whether invoices have been accepted, EUAs delivered, or payments made without a centralized system. Excel is inadequate for emissions compliance, prompting companies to seek professional solutions.

• Shipman clause disputes: Shipman clauses remain a source of friction, especially for non-European owners reluctant to accept responsibility for EU ETS compliance. Third-party managers often attempt to shift this responsibility to owners, which has proven challenging. Managers, as the entities handling compliance, require appropriate compensation for the added workload and protection against counterparty risks.

• Challenges with MOHAs (Monitoring Operators Holding Accounts): Opening MOHAs remains a challenge for many companies. Without them or Union Registry Trading Accounts, companies face inefficiencies such as being unable to receive or purchase EUAs. Vessel-specific MOHAs create additional inefficiencies, and concerns about “contaminating” an entire fleet due to non-compliance on one vessel have proven exaggerated.

• EUA price risks: Limited access to MOHAs and Trading Accounts could have exposed companies to price risks in 2024. However, the relatively low volatility of EUA prices mitigated these risks, providing stability for companies navigating the first year of compliance.