The inclusion of the maritime sector in the EU Emissions Trading System (EU ETS) has introduced new obligations for shipping companies regarding emissions monitoring, reporting, and allowance management. Compliance with these regulations requires a structured approach to data collection, verification, and strategic procurement of allowances.
This article provides a step-by-step guide on the practical implementation of EU ETS compliance, covering emission data accuracy, verification processes, control systems, and allowance trading strategies.
At VURDHAAN, we support maritime operators in meeting EU ETS requirements through expert guidance, AI-driven monitoring tools, and tailored sustainability solutions.
Step-by-Step Compliance Checklist
1. Preparing Emission Data and Ensuring Accuracy
Accurate emissions monitoring and reporting are essential for EU ETS compliance. Shipping companies must establish data collection methodologies, verification processes, and control systems to ensure the reliability of reported emissions.
Monitoring and Reporting
- Shipping companies must track greenhouse gas (GHG) emissions, fuel consumption, and transport work throughout the year.
- Monitoring must align with an approved monitoring plan (MP), which outlines methodologies, procedures, and systems for emissions tracking.
- The monitoring plan must be assessed by an independent accredited verifier and approved by the administering authority.
- Companies should maintain a “living document” approach, updating the monitoring plan whenever there are changes in fuel use, measuring equipment, or data collection methods.
- Written procedures should be developed to supplement the monitoring plan and be made available to verifiers and authorities upon request.
- Data flow activities must be well-documented to ensure transparency and completeness of emissions monitoring.
Emission Calculation and Reporting
- Annual emissions reports (ERs) must be submitted for each ship, along with a company-level emissions report (CER) aggregating emissions from all vessels.
- Reports must include details on fuel consumption, distance traveled, time spent at sea, and cargo carried.
- Emissions must be reported separately for each greenhouse gas and each voyage.
- From 2026, reporting will include methane (CH4) and nitrous oxide (N2O) in addition to CO2.
- Sustainable biofuels can have zero CO2 emissions factors, provided companies supply proof of sustainability for each batch.
- Default emission factor values must be used unless certified actual emission factors are available.
- Companies should use approved fuel consumption monitoring methods, including bunker delivery notes (BDN), tank readings, flow meters, or direct emissions measurement.
- For voyages spanning two calendar years, emissions must be split between respective reporting periods.
2. Verification of Accuracy
Emissions reports must undergo independent verification to ensure compliance with EU ETS regulations.
- All ship-level and company-level emissions reports must be verified by an accredited verifier by March 31 of the following year.
- The verification process includes assessing the completeness, consistency, and accuracy of reported data.
- Verifiers check whether monitoring methodologies align with approved monitoring plans and regulatory standards.
- Companies must provide documentation to demonstrate data transparency and compliance with sustainability criteria for biofuels.
- Authorities may conduct spot checks on verified reports and request corrections where necessary.
- If a company fails to submit a compliant report, authorities may impose conservative estimates for emissions.
- If an on-site visit is not possible, a virtual site verification may be permitted.
3. Managing Data Gaps and Estimations
Shipping companies must have procedures in place to address missing data and ensure that estimations are conservative and verifiable.
- If a primary monitoring method fails, companies must use one of the alternative approved monitoring methods.
- Secondary data sources can be used for corrections, but estimations must be justified.
- Risk assessment procedures should be implemented to identify potential data gaps and ensure continuous compliance.
4. Establishing a Control System
A robust control system helps ensure accurate emissions tracking and compliance with EU ETS regulations.
- Risk assessments should be conducted regularly to identify and mitigate potential data misstatements.
- Control activities must include checks on data validation, reporting accuracy, and risk mitigation strategies.
- Companies must ensure quality assurance for all measurement equipment and reporting processes.
5. Meeting Deadlines and Submission Requirements
Timely reporting and allowance surrender are crucial for maintaining compliance.
- March 31: Verified emissions reports must be submitted to the administering authority, flag states, and the European Commission via THETIS-MRV.
- June 30: Ships must carry a Document of Compliance (DoC) for verification during inspections.
- September 30: Companies must surrender allowances equivalent to their reported emissions.
- From 2025 onward, surrender obligations will increase:
- 40% of 2024 emissions
- 70% of 2025 emissions
- 100% from 2026 onward
6. Establishing Allowance Procurement Strategies
Shipping companies must develop strategies for purchasing and managing emissions allowances within the EU ETS.
Understanding Allowances
- The EU ETS cap-and-trade system limits total emissions, with the cap decreasing annually.
- EU Allowances (EUAs) must be surrendered to match reported emissions.
- EUAs from 2013 onward do not expire and can be banked for future use, but surrendered allowances cannot be retrieved.
Methods for Acquiring Allowances
- Primary Market (Auctions): Companies can buy EUAs through the European Energy Exchange (EEX), but participation requires high purchase volumes.
- Secondary Market: Most companies purchase allowances via financial institutions, hedge funds, and bilateral contracts.
- No Free Allowances: Unlike other sectors, shipping companies do not receive free allocations.
Strategic Considerations
- Market Analysis: Monitoring EUA prices and market trends is essential for cost-efficient purchasing.
- Risk Management: Strategies such as forward contracts or financial hedging can reduce exposure to carbon price volatility.
- Allowance Procurement Timing: Companies must decide whether to purchase allowances throughout the year or closer to the surrender deadline, based on cash flow and price forecasts.
7. Internal Training and Cross-Department Awareness
Ensuring compliance requires collaboration across finance, operations, and technical teams.
- Finance Teams should understand the financial implications of EU ETS compliance, including EUA costs and procurement strategies.
- Operations Teams must be trained on data collection, emissions monitoring, and reporting accuracy.
- Technical Teams need expertise in fuel measurement, emissions calculations, and control system implementation.
- Training and awareness programs should be implemented to ensure staff understand their roles and responsibilities.
8. Regular Updates and Change Management
Monitoring plans must be updated regularly to reflect changes in regulations, fleet operations, or monitoring methodologies.
- Annual Reviews: Companies must assess whether their monitoring plans remain accurate and compliant.
- Triggers for Updates: Changes in fuel type, data availability, emission sources, or ownership require modifications to the plan.
- Approval Process: Significant changes must be assessed by a verifier and approved by the administering authority.
Conclusion: Navigating EU ETS Compliance for Long-Term Success
Shipping companies must take a structured approach to EU ETS compliance by implementing accurate emissions monitoring, data verification, and strategic allowance procurement.
By focusing on operational efficiency, fuel switching, control systems, and market-based compliance strategies, companies can minimize regulatory risks while optimizing costs.
At VURDHAAN, we provide tailored guidance and AI-driven tools to help maritime operators manage EU ETS compliance with confidence and efficiency.
Through proactive compliance, the maritime industry can transition toward a lower-carbon future while maintaining operational and financial stability.