Global law firm HFW notes in a recent briefing has noted that the planned inclusion of maritime transport in the EU Emissions Trading System was moving forward rapidly, and the legislative text could be finalised in Q4 of 2022.
As part of the legislative process, both the European Parliament and the European Council have very recently proposed their own respective amendments to the proposals originally put forward by the European Commission back in 2021.
HFW has now produced a factsheet sets out the key issues arising that had the potential to impact all the parties in the physical transport chain, and which could give rise to risks and disputes in the future.
On July 14th 2021 the European Commission (the Commission) published proposals to include CO2 emissions from maritime transport in the EU Emissions Trading System (EU ETS), as part of the EU’s broader ‘Fit for 55’ package.
HFW said that the relevant EU legislation underpinning the inclusion of maritime transport could be finalized as early as September this year, pending the outcome of discussions between the Commission, the European Parliament and the European Council (often referred to as the ‘trialogue’), although it could very well take longer.
Preceding this, on June 22nd this year, the Parliament published various proposed amendments to the Commission’s initial proposals which, if adopted, would materially alter the way the EU ETS would apply and impact the maritime sector, said HFW.
Shortly after, on June 28th, the Council published its own “general approach” on the EU ETS which, whilst more similar to the Commission’s original proposals, also differed in some respects from both the Commission’s and the Parliament’s respective proposals.
HFW said that, while it remained to be seen which of the proposed amendments end up in the finalized legislation following the trialogue, the scope could be “very significant” for the maritime sector. The amendments, if adopted, had the potential to impact trade, routes,
activities, and the type and size of vessels covered, as well as the type of emissions to be regulated, access to the emissions market and, more generally, how and when the EU ETS would apply to the maritime sector.
The factsheet covers:
HFW warned that, because the regulatory landscape remained uncertain, it was advisable to keep a watchful eye on the EU position as it could very well change. “As we await the outcome of the trialogue, interested parties would do well to use the time to review their contracts and consider including provisions that adequately allocate responsibility under the
EU ETS”.
Meanwhile, it was noted by HFW that the FuelEU Maritime initiative had attracted far less industry and media attention to date, but nevertheless had a very important part to play in the ‘Fit for 55’ package and could potentially have significant commercial and contractual implications.
HFW said that it was also vital that the parties did not lose sight of the fact that important international emission regulations – in the form of MARPOL’s EEXI and CII – would be coming into force from January 1st 2023. The compliance steps required are very different to the EU ETS, requiring improvements to vessel energy efficiency and the ongoing reduction of carbon intensity on an annual basis.
HFW observed that this raised different considerations, and parties were again advised to prepare for these regulations and review their contracts in order to mitigate compliance and risk going forward.
Research undertaken by Shamsheer Singh, Master Mariner, and Sophie Dent, Trainee Solicitor.
