This article provides general information, not legal, regulatory or financial advice. Requirements depend on the applicable contract, authority and jurisdiction.
What applies from 1 January 2026
2026 is the year the EU Emissions Trading System stops being a phased introduction for shipping and becomes a full operating cost.
| Parameter | 2024 | 2025 | 2026 onward |
|---|---|---|---|
| Share of applicable emissions requiring surrender | 40% | 70% | 100% |
| Gases covered | CO₂ | CO₂ | CO₂, CH₄, N₂O |
| Vessel scope | ≥5,000 GT cargo and passenger ships | Same | Same |
| Voyage scope | 100% intra-EU/EEA; 50% inbound/outbound; 100% at berth in EU/EEA ports | Same | Same |
Two changes bite simultaneously in 2026: the final phase-in step from 70% to 100%, and the addition of methane and nitrous oxide. For LNG-fuelled tonnage in particular, the inclusion of methane changes the calculation materially, because methane slip that was previously outside the scheme now carries a cost.
How the mechanics work
- Monitor. Emissions are monitored under the EU MRV regulation according to an approved monitoring plan.
- Report and verify. Annual emissions reports are verified by an accredited verifier.
- Attribute. Emissions are attributed to the "shipping company" — the shipowner or, where a documented arrangement exists, the ISM company or other entity that has assumed responsibility.
- Surrender. Allowances (EUAs) corresponding to the previous year's applicable emissions are surrendered by the annual deadline.
- Enforce. Non-compliance brings financial penalties, public disclosure, and in severe cases the possibility of expulsion or port access restrictions.
The administering authority for a company is assigned by the EU, and it is that authority that pursues enforcement.
Who actually pays
This is the question that generates the most commercial argument. The regulated entity is the shipping company as defined by the directive — which is frequently the ISM company rather than the registered owner. But the emissions are generated by decisions the charterer often controls: speed, route, port rotation.
The directive contemplates that the company should be entitled to reimbursement from the entity ultimately responsible for the fuel purchase and operational decisions, and member states are required to have arrangements enabling this. In practice it is handled contractually, and the market has converged on ETS clauses in charterparties.
Practical guidance:
- Never leave the charterparty silent. Silence defaults the cost to the owner.
- Define who buys and holds allowances, and who carries the working capital.
- Define the price basis — market price at a stated point, or actual cost.
- Define the reconciliation and settlement timetable, including redelivery.
- Address what happens if the charterer defaults after redelivery.
Controlling the cost
| Lever | Mechanism | Speed of effect |
|---|---|---|
| Hull and propeller condition | Lower power for same speed | Immediate after cleaning |
| Speed optimisation | Power varies roughly with speed cubed | Immediate |
| Arrival planning / virtual arrival | Removes speed-then-wait | Immediate |
| Trim optimisation | Small but continuous | Immediate |
| Engine tuning and maintenance | Lower SFOC | Weeks |
| Energy saving devices | Ducts, fins, rotors | At retrofit |
| Fuel switching | Lower emission factor fuels | At availability |
| Route selection | Distance and weather | Per voyage |
| Methane slip management (LNG) | Newly relevant in 2026 | Engine dependent |
The first four cost almost nothing and are entirely within a ship manager's control. Any 2026 conversation about ETS cost that starts with fuel switching and skips hull condition is starting in the wrong place.
Treasury and accounting
EU ETS introduces a genuine treasury function to ship operators:
- Working capital. Allowances must be purchased and held before surrender.
- Price risk. EUA prices move; unhedged exposure is real. `[VERIFY]` Check the current EUA price before publishing any specific figure.
- Accounting treatment. Allowances need a home in the chart of accounts, with a provision recognised as emissions occur.
- Voyage attribution. Cost must be attributable to individual voyages to support charterparty recovery.
That last point is where most operators are weakest. If emissions cost cannot be traced to a voyage and a counterparty, recovery becomes a negotiation instead of an invoice.
Data quality is the gating factor
Everything above depends on one dataset: fuel consumed, by type, attributed to a correctly classified voyage leg. Classification errors — treating an inbound voyage as intra-EU, or missing an at-berth period — produce wrong surrender quantities in both directions. Over-surrendering is a straight cash loss; under-surrendering is a penalty.
Build the classification into the voyage record at the time, not into a spreadsheet at year end.
based on Directive (EU) 2023/959 amending Directive 2003/87/EC and the EU MRV Regulation as amended. This is general information, not legal or regulatory advice; confirm scope and obligations with your administering authority and verifier. Reviewed by the Zeaclub Editorial Team, 24 August 2026.
Frequently asked questions
Which ships are covered?
Cargo and passenger ships of 5,000 GT and above. Offshore vessels and certain other categories have been brought into scope on their own timeline — confirm the current position for your vessel type.
What proportion of emissions must be surrendered in 2026?
100% of applicable emissions: 100% for intra-EU/EEA voyages and at-berth emissions in EU/EEA ports, and 50% for voyages between an EU/EEA port and a third-country port.
Are methane and nitrous oxide included?
Yes, from 2026, alongside CO₂.
Can the cost be passed to charterers?
Contractually, yes, and the directive envisages reimbursement by the entity responsible for operational decisions and fuel purchase. It must be written into the charterparty; silence leaves the cost with the regulated company.