Applicability: shipowners, ship operators and ship managers.
From 1 January 2024, maritime emissions will be included in the European Union Emissions Trading System (EU ETS). This means the acquiring and surrender of emission allowances for ships over 5,000GT that call at a port or anchorage within the European Economic Area (EEA – EU plus Norway and Iceland)
This new requirement is part of the European Commission’s “Fit for 55” package for ships, which in 2023 has revised the EU Monitoring Reporting and Verification (MRV) Regulation (Regulation EU 2015/757) and now includes shipping in the Emissions Report Trading Scheme (ETS) Directive (Directive (EU) 2003/87).
Deadlines for compliance
Requirements for MRV and ETS compliance start on 1 January 2024. MRV Monitoring Plans need to be updated and assessed by accredited verifiers, ahead of submission to Administering Authorities, by 1 April 2024.
While the implementing and delegated acts supporting the MRV Regulation and ETS Directive are expected to be published at the end of 2023 or beginning of 2024, action needs to be taken now.
Responsibility for compliance
The responsibility for ETS compliance lies with the 'shipping company', which under article 3(w) of Directive (EU 2003/87) means "the shipowner or any other organisation or person, such as the manager or the bareboat charterer, that has assumed the responsibility for the operation of the ship from the shipowner", including ISM compliance.
The responsibly for compliance with MRV can be either the "the shipowner or any other organisation or person, such as the manager or the bareboat charterer, which has assumed the responsibility for the operation of the ship from the shipowner".
Responsibility for MRV and ETS compliance, including payment of ETS emissions allowances, must be contractually delegated to the same responsible entity. Shipowners may choose to maintain this responsibility or delegate it, however in the absence of a contractual mandate for compliance, responsibility will revert to the shipowner.
Overview of MRV and ETS
Two previous Lloyd’s Register Class News have been published:
- Class News 07/2023 provides an overview of the general principles for compliance with both MRV and ETS.
- Class News 14/2023 provides an overview of the specific changes that the updated EU MRV and ETS will require of ships calling at a port or anchorage within the EEA. It summarises the details anticipated to be clarified in the delegated and implementing acts.
This Class News outlines the key steps that shipowners and ship managers are strongly recommended to follow to ensure the timely submission of the assessed Monitoring Plan (MP) and Emission Report to the Administering Authorities, as well as surrendering of ETS allowances.
Key steps and recommendations
By end of 2023:
Shipowners/ship managers/charterers should have agreed on the responsible entity for both ETS and MRV obligations. If a shipowner decides to delegate the responsibility, there must be a contractual arrangement in place that can be shared with the relevant verifiers and Administering Authorities upon request.
Lloyd’s Register (LR) Recommendation: Decisions on responsible entities for compliance with MRV and ETS should be decided now. The designated entity responsible for compliance should be the same for both ETS and MRV. Contracts specifying responsibility should be negotiated and in place ahead of Monitoring Plan assessment by verifiers.
From October 2023:
Shipowners and ship managers must prepare the Monitoring Plan according to the pending revised Implementing Regulation (EU) 2016/1927 Annex I – Monitoring Plan Templates. Shipowners and ship managers with ships that have a Monitoring Plan already in place must have it updated, adding in the newly required additional information.
LR Recommendation: The contractually designated party responsible for MRV and ETS compliance should look at the draft Monitoring Plan requirements now and start compiling the appropriate information based on the draft Monitoring Plan template.
By January 2024 (or when the official Monitoring Plan template is available):
Shipowners/ship managers/charterers should send the ship’s Monitoring Plan to LR for assessment*. LR clients must submit this through Emissions Verifier, which allows the assessed Monitoring Plan to be exported via an .xml file and imported into THETIS-MRV.
LR Recommendation: To help ensure that assessment is complete ahead of the 1 April 2024 submission deadline, all information should be uploaded to Emissions Verifier no later than a month after the official publication of the Monitoring Plan template**. Should document upload be made after this date, LR cannot guarantee that the Monitoring Plan assessment will be completed in time for the 1 April 2024 submission deadline to the Administering Authorities.
*NOTE: LR is accredited for EU MRV services through its wholly owned subsidiary Hellenic Lloyd's S.A. in Greece, which has received accreditation by the Hellenic Accreditation System (E.SY.D). LR holds existing accreditation for the Regulation (EU) 2015/757 (adopted 2015) through E.SY.D. In addition, LR will apply to E.SY.D for accreditation under the 2023 revised MRV Regulation for the extended scope of works as soon as the pending Commission Delegated Regulation on the verification activities, accreditation of verifiers and approval of monitoring plans by administering authorities is published.
**NOTE: This is based on the current understanding that the EU will not publish monitoring plan templates until early 2024. Should this change submission to Emissions Verifier within a month of publication of the templates will no longer be required. Additional information will be sent out on required timelines for submission to LR Emissions Verifier.
From January 2024 (or when the updated THETIS-MRV module is available):
Shipowners/ship managers/charterers need to update ship Monitoring Plan information in the THETIS-MRV platform. The THETIS-MRV currently lacks additional fields for the updated Monitoring Plan requirements, but this expanded functionality is expected to be available in January 2024.
From January 2024:
Shipowners/ship managers/charterers need to prepare and submit ship level Emission Reports to LR for verification. This should cover CO2 emissions only, as per the MRV requirements from Regulation EU 2015/757 as published April 2015, based on data collected in 2023.
From 1 January to 31 December 2024:
At the ship level, shipowners/ship managers/charterers must start monitoring voyages, fuel consumption, emissions and, at the end of the first monitoring period, start preparing the ship Emissions Report.
From 31 January to mid-March 2024:
LR will undertake MRV verification and site visit*** activities to assess the Monitoring Plan for conformance with Regulation EU 2015/757 (as adopted in 2023).
***Note: A site visit may be physical, or virtual if there is sufficient understanding of the monitoring and reporting systems in place, the complexity of the ship allows for a virtual visit, and information can be obtained remotely. Site visits cannot be waived in the event of the development of a new monitoring plan or a modification to an existing one.
By 1 February 2024:
The European Commission will publish the first Administering Authority list (to be updated every two years), indicating the EU Member State that will be the attributed Administering Authorities for each shipping company. If a company, as defined under EU ETS (2003/87 article 3(w)) is not on the list (e.g. a new company), the shipping company will have to register for THETIS-MRV with the THETIS-MRV helpdesk who will be able to assist in assigning ships to an Administering Authorities. The company will then be added to the list at its next update.
It is expected that companies will be able to open a Union Registry Account and Maritime Operator Holding Accounts in 2024 after publication of the list of responsible Administering Authorities. This Holding Account will be key to enabling EU allowances to be purchased and surrendered in compliance with the EU ETS. For more information, see FAQ – Maritime transport in EU Emissions Trading System (ETS) (europa.eu).
Before 1 April 2024:
Shipowners/ship managers/charterers need to submit the Monitoring Plan assessed by LR to the Administering Authorities via THETIS.
Before 31 March 2025 and every year thereafter:
LR needs to verify the submitted Emissions Report at ship and company level. As part of this verification, each company, and possibly the ship, will receive a physical site visit at least once every four years. Site visits in intervening years may be virtual or waived (if conditions allow), but may not be waived for three consecutive periods. This ER verification, including site visit, must be completed ahead of the 31 March submission deadline.
By 31 March 2025 and every year thereafter:
Shipowners/ship managers/charterers need to submit the verified Emissions Report to the Administering Authorities.
1 month before 31 March 2025 and every year thereafter:
Shipowners/ship managers/charterers need to prepare and submit ship and company level Emission Reports to the verifier for assessment.
By 6 June 2025:
Administering Authorities will approve the Monitoring Plan submitted by 1 April 2024 for compliance with EU 2015/757 MRV requirements.
By 30 September 2025 and every year thereafter:
Shipowners/ship managers/charterers or shipping companies are to surrender sufficient EU allowances to cover the verified emissions as per the verified ER data at company level. This should all be completed through a Union Registry Account. For more information on Union Registry Accounts, please see FAQ – Maritime transport in EU Emissions Trading System (ETS) (europa.eu).
How we can help
For more information on the LR services available to support shipowners and ship managers with EU MRV and ETS compliance, please contact dcsmrv@lr.org