Shipping and Emissions Trading Schemes. Latest from the EU and the UK.

The EU’s inclusion of shipping in the ETS comes into effect on 1 January under DIRECTIVE (EU) 2023/959 of 10 May 2023. The amended directive will also affect the position of storage of captured emissions from a registered emitter. Previously, a registered emitter was under no obligation to surrender allowances in respect of emissions which are verified as captured and transported by pipeline to a storage facility, authorised in accordance with the CCS Directive. The amended ETS Directive now removes the previous requirement that CCS had to be transported by pipeline to a storage facility. The reference to CCS in the table to Annex I to Directive 2003/87/EC is amended so as to read “Transport of greenhouse gases for geological storage in a storage site permitted under Directive 2009/31/EC, with the exclusion of those emissions covered by another activity under this Directive.”

This is amplified by article 69 of the Preamble which states:

 “As CO2 is also expected to be transported by means other than pipelines, such as by ship and by truck, the current coverage in Annex I to Directive 2003/87/EC for transport of greenhouse gases for the purpose of storage should be extended to all means of transport for reasons of equal treatment and irrespective of whether the means of transport are covered by the EU ETS. Where the emissions from the transport are also covered by another activity under Directive 2003/87/EC, the emissions should be accounted for under that other activity to prevent double counting.”

This means that captured carbon from a registered emitter can now be transported a permitted storage facility by ship without the emitter being obliged to surrender allowances in respect of its captured emissions.

As for the UK and its ETS scheme, on Monday 3 July the UK government announced that: domestic shipping for vessels above 5000 grt will be required to participate in the UK’s Emissions Trading Scheme starting in 2026.

The government would also: expand the existing scope of the scheme to create a level playing field between operators who use pipeline and non-pipeline modes of transportation of CO2, working with key regulatory partners to establish how Non-Pipeline Transport (NPT) should best be integrated into the existing UK ETS framework; and  review its policy of expanding the UK ETS to methane emissions from upstream oil and gas and other traded sectors.

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Professor Simon Baughen

Professor Simon Baughen was appointed as Professor of Shipping Law in September 2013 (previously Reader at the University of Bristol Law School). Simon Baughen studied law at Oxford and practised in maritime law for several years before joining academia. His research interests lie mainly in the field of shipping law, but also include the law of trusts and the environmental law implications of the activities of multinational corporations in the developing world. Simon's book on Shipping Law, has run to seven editions (soon to be eight) and is already well-known to academics and students alike as by far the most learned and approachable work on the subject. Furthermore, he is now the author of the very well-established practitioner's work Summerskill on Laytime. He has an extensive list of publications to his name, including International Trade and the Protection of the Environment, and Human Rights and Corporate Wrongs - Closing the Governance Gap. He has also written and taught extensively on commercial law, trusts and environmental law. Simon is a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he currently teaches at Swansea on the LLM in:Carriage of Goods by Sea, Land and Air; Charterparties Law and Practice; International Corporate Governance.

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