UK extends ETS scheme to encompass domestic shipping

The extension of the ETS to cover large maritime vessels of 5000 GT and above will take effect in 2026. The decision was announced alongside the extension of the scheme to cover waste incineration and energy from waste sector.

The UK government announced that the announcement was being made to provide operators with time to prepare and ensure a smooth transition for affected businesses. The details of the implementation of the scheme will be subject to further consultation. 

The extension of the scheme to cover shipping is intended to encourage industries that fall within the scope of the UK’s ETS scheme to cut their carbon footprint by investing in energy efficiency and cleaner, or renewable technologies.

The UK Chamber of Shipping responded to the decision by describing the announcement as “a significant step forward in the journey to reach net zero emissions from domestic shipping in the UK”. 

“It is important that as the details of the scheme become clear it helps, rather than hinders, the drive towards net zero. This means ETS funds raised from domestic shipping must be used to aid the transition to net zero for the sector. This should include supporting the development of zero-emission vessels, fuels and technology and associated port infrastructure.”  

Significant differences between the implementation of the EU and the UK ETS schemes, related to the offering of extra allowances in the UK scheme, which the EU scheme has decided to phase out, as well as level of the price cap, are likely to impede efforts to improve coordination between the two schemes. 

The most striking difference between the two ETS schemes is the treatment of emissions during shipping legs between EU ports and Third Countries. Fully 100% of emissions on voyages and port calls within the EU/EEA, and 50% of emissions on voyages into or out of the EU/EEA are subject to the EU ETS. To avoid evasive behaviour, container ships stopping in transhipment ports outside the EU/EEA but less than 300 nm from an EU/EEA port, need to include 50% of the emissions for the voyage to that port as well, rather than only the short leg from the transhipment port.