Philippos Ioulianou, Managing Director, EmissionLink.

The European Commission's proposed expansion of the EU Emissions Trading System (EU ETS) for maritime transport represents a significant development in regional climate policy. The EU ETS has applied to shipping since January 2024, with obligations phased in over three years, and the latest proposals would broaden its reach further. However, the real test lies not in whether the system becomes more expansive, but in whether it becomes more coherent, proportionate, and effective.

Two concerns stand out in particular. The first is the risk of overlapping carbon-pricing regimes as the International Maritime Organization (IMO) advances toward its own global mechanism, having set a goal of reaching net-zero greenhouse gas emissions from international shipping by or around 2050. The second is the widening gap between the revenues the shipping industry is expected to contribute and the amount reinvested in maritime decarbonisation.

These questions are especially relevant to major shipping centres such as Greece and Cyprus, two of the largest ship-owning nations in the EU. Across the Eastern Mediterranean, shipowners, managers, and offshore operators face an increasingly demanding compliance environment. As their regulatory exposure grows, so does the commercial importance of understanding how carbon costs will be allocated, managed, and recovered.

Offshore Activities and the Port-to-Port Model

The planned inclusion of offshore activities from 2027 illustrates the challenge. Under the proposal, offshore worksites are set to be treated as ports of call, bringing more support-vessel activity within the ETS framework. In practice, however, offshore shipping does not fit neatly into a conventional port-to-port model.

Offshore vessels may remain on location for extended periods, serving projects where fuel use, operational control, and emissions responsibility are divided among owners, charterers, contractors, and developers. The ETS therefore becomes not merely a reporting issue, but a contractual and commercial one. Responsibility for monitoring emissions, acquiring allowances, and bearing carbon-price exposure will increasingly need to be addressed in charterparties and project agreements.

Smaller Vessels and Proportionate Implementation

The Commission's proposal to bring certain categories of vessels between 400 and 5,000 gross tonnage (GT) into the EU ETS from 2029 will also have significant implications. The current threshold of 5,000 GT already captures the vast majority of emissions from commercial shipping, so lowering it would extend obligations to segments that have had limited exposure to carbon markets. Many smaller commercial and offshore operators are likely to enter a system designed around larger organisations with dedicated compliance teams, established data processes, and greater access to carbon-market expertise. Broader coverage may be justified, but implementation must remain proportionate.

Coexistence with a Future IMO Framework

There are welcome elements in the proposals. Greater alignment between MRV (Monitoring, Reporting, and Verification) and FuelEU Maritime reporting should reduce duplication and the risk of inconsistent submissions. Changes to transhipment rules are also intended to limit circumvention and protect the system's integrity.

However, these proposals do not resolve how the EU ETS will coexist with a future IMO carbon-pricing framework. The Commission has acknowledged the possibility of double payment, but acknowledgement alone is insufficient. Applying regional and global charges to the same emissions without a clear reconciliation mechanism would create unnecessary costs and uncertainty, particularly for operators trading between EU and non-EU ports.

Shipping should not pay twice for the same tonne of emissions. If both systems remain in place, there must be an automatic, transparent, and workable method for recognising payments and reconciling liabilities.

Revenue Reinvestment and Industry Support

This principle should also apply to revenue allocation. Shipping is expected to contribute substantially to the ETS, yet only a limited share appears destined for maritime decarbonisation. Under the current framework, ETS revenues flow primarily into Member State budgets and the EU Innovation Fund, leaving maritime-specific reinvestment uncertain. This imbalance risks undermining confidence in the policy.

Philippos Ioulianou argues that at least 50% of ETS revenues generated by shipping should be reinvested in maritime decarbonisation at the national level. Support should also be extended across sustainable fuels, port infrastructure, vessel retrofits, and credible energy-efficiency technologies. Carbon pricing can reduce emissions only when matched by practical investment that enables the industry to move forward.

A Core Commercial Consideration

For shipping companies, the ETS is no longer simply a compliance requirement. It is a core commercial consideration affecting costs, contracts, investment decisions, and competitiveness. Companies such as EmissionLink, with a presence in Greece and Cyprus, combine local market knowledge with specialist expertise, helping firms turn evolving emissions rules into practical compliance and commercial strategies.

Ultimately, the credibility of the EU ETS will depend not on how much money it raises, but on whether it delivers fair treatment and meaningful emissions reductions for the industry expected to fund it.

Source: Ship & Bunker