Recently, according to the International Transport Intermediaries Club (ITIC)**, the European Union's (EU) new emissions trading scheme (ETS) could cost the shipping industry billions of dollars.
The expanded EU ETS, which will come into force on 1 January 2024, will set an annual absolute cap on greenhouse gas (GHG) emissions for ships of 5,000 tonnes and above calling at EU ports. However, its implementation is creating tensions between shipowners and charterers, particularly around clauses in charterparties that ensure a fair allocation of costs and legal risks.
Robert Hodge, Managing Director of ITIC, believes it is critical that ship management companies take the necessary due diligence to ensure these risks are mitigated.
The ship management company will play an important role in managing the program for the shipowner. Therefore, it is essential that the ship management agreement sets out the responsibilities and obligations to do so. The EU ETS could incur billions of dollars in additional costs for the industry, so ship management companies and charterers should assess all aspects of the costs and legal risks associated with the scheme to ensure they do not find themselves financially unstable. Robert Hodge points out. The ITIC's warning follows a recent meeting of the Baltic International Maritime Council's (BIMCO) Records Committee, which includes ITIC and other shipping stakeholders. During the meeting, BIMCO adopted one ETS subsidy clause for its ship management agreement, Shipman, as well as three ETS clauses tailored to voyage charterparties.
These provisions are designed to facilitate collaboration and provide clarity and certainty as new regulations come into force, transforming the way the industry operates to achieve compliance and reduce emissions.
In less than a month, our industry will be included in the EU ETS, and in the future, we can expect similar emissions schemes. The new ETS provisions have been developed to help parties meet the requirements of the EU ETS and any applicable emissions plans we may face in the future," said Nicholas Fell, chair of the BIMCO Documentation Committee.
The latest update to the BIMo Shipman Emissions Trading Scheme Allowance Terms 2023 ensures the costs and liabilities of acquiring, transferring and relinquishing emissions allowances for vessels operating under the emissions scheme within the scope of the ship's management.
The purpose of Shipman's ETS provisions is to promote compliance with emissions trading schemes by distributing costs and responsibilities between owners and managers. This includes the reporting of emissions data, as well as the transfer and relinquishment of emission allowances for ships operating under the emissions program," said Stinne Taiger IV, Director of Contracts & Support at BIMCO.
In addition, the Baltic International Maritime Council (BIMCO) subcommittee is currently working on the development of ETS clauses for freight contracts.
The introduction of the EU ETS is the result of increased regulation by the International Maritime Organization (IMO) and the European Union to reduce greenhouse gas emissions from ships traversing European waters and calling at European ports. **Blue Water Lab