What is EU ETS and how is it impacting maritime trade?
Since the addition of shipping to the EU’s emissions trading system in 2024, maritime shipping now participates in the cap-and-trade system which trades and auctions European Union Allowances (EUAs) for emissions. A substantial stride in the decarbonization of shipping, maritime EU ETS also has monumental cost implications for all sides of the marine contract.
Since the first phase went into effect in January 2024, many in the maritime industry have wondered how EU ETS will affect them. Most maritime stakeholders have been focused on building EU ETS reporting into their contract workflows. But balancing profitability with the regulatory requirements of maritime ETS requires permanent changes in decision criteria at all stages of the voyage lifecycle—from chartering to voyage operations, exposure management, and post-voyage financials.
Top challenges for EU ETS compliance
EU ETS and emissions calculations
Accurately calculating emissions expenses is essential for EU ETS compliance and cost management in the maritime industry, but it is also multifaceted and complex. The challenge lies in integrating diverse data points to understand the carbon impact accurately, including route deviations, bunker modifications, EUA prices, and exchange rates.
Carbon visibility across stakeholders
Maintaining consistent and transparent visibility of emissions data across maritime stakeholders throughout the voyage lifecycle can be challenging, particularly as voyage realities evolve. The involvement of multiple stakeholders, disparate data definitions, and the need for real-time data further complicate cross-stakeholder visibility around maritime EU ETS and other measures of decarbonization.
Carbon exposure management in maritime EU ETS
Managing carbon exposure in an EU ETS world requires a comprehensive understanding of both physical and financial aspects of carbon markets. As carbon assumes its permanent role as a third pillar of risk—in addition to freight and fuel risk—stakeholders are challenged to accurately assess risk amid market changes, calculate mark-to-market values, and track physical contracts and paper trades.
EU ETS reporting and documentation
Generating accurate and detailed reports to prove regulatory compliance under the EU ETS and other global standards is a complex process that requires careful adherence to guidelines. In addition to reporting on carbon’s P&L impact, stakeholders in the shipping and maritime industries are challenged to seamlessly produce evidence of compliance across global regulations and contractual obligations.
How Veson addresses maritime shipping EU ETS
The Veson IMOS Platform’s emission expense settlement workflow provides robust support for EU ETS compliance. It features a Carbon Calculator for determining emissions costs, integrated voyage management for precise reporting, and tools to evaluate and hedge carbon risk in both the EUA and EUA Futures markets. Let’s take a closer look at these capabilities for shipping EU ETS.
Integrated Carbon Calculator
The Veson IMOS Platform is equipped with an advanced Carbon Calculator designed to simplify the complex task of calculating emissions expenses. By integrating data points such as route deviations, bunker modifications, and real-time EUA prices, the platform ensures accurate and comprehensive emissions calculations, then translates calculated emissions expenses into noon reports.
Customizable report generation for EU ETS compliance
Utilize the data reporting features of the IMOS Platform to monitor emissions costs linked to each contract and precisely distribute expenses to various charterers according to cargo, following Sea Cargo Charter guidelines. Then, use Veson’s reporting workspace to easily create comprehensive reports that showcase regulatory compliance to EU ETS and other global decarbonization guidelines.
Carbon risk management workspace
The Veson IMOS Platform helps assess and hedge against carbon risk in the EUA and EUA Futures markets in a single centralized workspace. The platform facilitates mark-to-market value calculations, records EUA futures in both EUR and USD, and tracks them alongside physical contracts to not only establish an inventory of these contracts but understand their net impact.
“We initially thought the biggest obstacle would be purchasing and acquiring the EUAs, however this turned out to be fairly simple and straightforward. Together with Veson, we have a strong tool to estimate our accumulating liability over the years, so we can top off our account accordingly.”
Lars Mathiasen | Head of Commercial Decarbonization & Head of Bunkers – TORM
Access our free maritime EU ETS toolkit
Fill out the form below to have our maritime EU ETS toolkit sent to your inbox. In it you’ll find actionable strategies, learnings, and insights on navigating the requirements and impact of shipping EU ETS.
Here’s what’s inside:
WEBINAR
Preparing for EU ETS with the IMOS Platform
BLOG
What a Potential US ETS Could Learn From the EU ETS
WEBINAR
EU ETS Learnings from BIMCO, TORM, and Trafigura
BRIEF
Navigating Regulatory Impacts like EU ETS with IMOS Platform