UK ETS Maritime Sector–Regulatory Developments and Compliance Actions

C26010 | 28 January 2025

Notification to: Ship Owners/ Managers/ Operators/ Verifiers

Introduction

This circular is issued to update stakeholders on the UK Emissions Trading Scheme (UK ETS) and its introduction for maritime emissions. It addresses:

• Domestic UK ETS for maritime (effective 1 July 2026)
• Proposed expansion to international maritime emissions (from 1 January 2028)
• Scope, applicability, and ship thresholds
• Monitoring, Reporting, and Verification (MRV) obligations
• Allowances and surrender requirements
• Exemptions and penalties for non-compliance
• Outlook and strategic considerations for shipping companies

Domestic UK ETS – Maritime Sector (Effective 1 July 2026)

Scope and Timing:
• Applies to cargo and passenger ships ≥5,000 GT performing intra-UK voyages and port stays in UK ports.
• Ships will be subject to an additional layer of carbon-pricing obligations alongside EU ETS and FuelEU Maritime.
• Emissions covered include CO₂, with CH₄ (methane) and N₂O (nitrous oxide) also included.

Obligations:
• Ships are required to monitor, report, and verify (MRV) emissions in accordance with UK ETS guidance.
• Shipowners/operators must purchase and surrender UK Emissions Allowances (UKAs) corresponding to verified emissions.
• MRV and surrender deadlines will be communicated by the administering authority; companies should establish procedures in advance.

Implementation Notes:
• Some implementation details remain under development, and further guidance from UK authorities is expected.
• Processes and procedures may not be fully aligned at the start; a phased and evolving approach is anticipated.
• While the UK seeks alignment with EU ETS, no formal integration is planned at this stage.

Practical Steps for Companies:
• Prepare monitoring and reporting systems to meet UK ETS requirements.
• Open UK ETS trading accounts or Maritime Operator Holding Accounts before the scheme becomes active.
• Ensure allowance surrender processes are in place to meet deadlines and avoid penalties.

International UK ETS Expansion – Maritime Sector (Proposed 1 January 2028)

Scope and Timing:
• Proposed to include international voyages starting or ending at UK ports.
• Companies would report 100% of emissions but surrender allowances for 50% of total emissions, similar to EU ETS.
• Applies to ships ≥5,000 GT, including those already covered under the 2026 domestic UK ETS.

Outlook:
• Rules for international voyages and additional vessel types are still evolving.
• Companies should adopt flexible compliance systems to prepare for:
• Changes in voyage scope
• Potential linking with EU ETS or other carbon markets
• Interaction with upcoming IMO carbon intensity measures and national climate rules in other jurisdictions

Allowances and Compliance

UK ETS Allowances (UKAs):
• One UKA corresponds to one tonne of CO₂ equivalent emitted.
• Allowances can be purchased through primary market auctions or secondary market transactions once accounts are established.
• Surrender of allowances is mandatory for verified emissions; failure to surrender will trigger penalties.

MRV Requirements:
• Ships must have approved monitoring plans.
• Annual emissions must be verified by accredited verifiers and reported to the UK ETS authority.
• Verified emissions determine the number of allowances to be surrendered.

UK ETS Reporting Platform:
Companies and vessels should ensure:
• The official “Manage your UK Emissions Trading Scheme reporting” online service is used for UK ETS compliance activities.
• Emissions monitoring plans are applied for and managed through the platform.
• Verified annual emissions reports are submitted via the platform within the applicable regulatory deadlines.
• Relevant personnel are familiar with the platform’s functions and compliance timelines.

Penalties for Non-Conformance:
• Publication of the company’s name.
• Financial penalties per excess tonne of CO₂ equivalent emitted without surrendered UKAs.
• Potential further enforcement or expulsion in cases of repeated non-compliance.

Act now

Ship Owners/ Managers/ Operators/ Verifiers are strongly encouraged to take proactive measures to ensure compliance, including:
• Review onboard systems, monitoring, and reporting procedures in line with UK ETS domestic and future international requirements.
• Prepare flexible MRV and allowance surrender systems to adapt to evolving guidance.
• Open UK ETS trading accounts or Maritime Operator Holding Accounts in advance.
• DBS verifiers will verify compliance with UK ETS requirements at the first company-level or shipboard audit.

For further guidance, companies should consult:

https://manage-emissions-reporting.service.gov.uk/landing
https://www.gov.uk/government/publications/participating-in-the-uk-ets/participating-in-the-uk-ets#registry