General Increase Bulletin No. 7/21

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1^st January 2024.

The EU ETS is limited by a 'cap' on the number of emission allowances. Within the cap, companies receive or buy emission allowances, which they can trade as needed. The cap decreases every year, ensuring that total emissions fall.

Each allowance gives the holder the right to emit:

One tonne of carbon dioxide (CO2), or;
The equivalent amount of other powerful greenhouse gases, nitrous oxide (N2O) and perfluorocarbons (PFCs).
The price of one ton of CO2 allowance under the EU ETS has fluctuated between EUR 60 and almost EUR 100 in the past two years. The total cost of emissions will vary based on the cost of the allowance at the time of purchase, the vessel’s emissions profile and the total volume of voyages performed within the EU ETS area. The below is for illustration purposes:
~A 30.000 GT passenger ship has total emissions of 20.000 tonnes in a reporting year, of which 9.000 are within the EU, 7.000 at berth within the EU and 4.000 are between the EU and an outside port. The average price of the allowance is EUR 75 per tonne. The total cost would be as follows:
~~9.000 * EUR 75 = EUR 675.000
~~7.000 * EUR 75 = EUR 525.000
~~4.000 * EUR 75 * 50% = EUR 150.000
~~Total = EUR 1.350.000 (of which 40% is payable in 2024)
For 2024, a 60% rebate is admitted to the vessels involved. However, this is reduced to 30% in 2025, before payment is due for 100% with effect from 2026.
Emissions reporting is done for each individual ship, where the ship submits their data to a verifier (such as a class society) which in turns allows the shipowner to issue a verified company emissions report. This report is then submitted to the administering authority, and it is this data that informs what emission allowances need to be surrendered to the authority.
The sanctions for non- compliance are severe, and in the case of a ship that has failed to comply with the monitoring and reporting obligations for two or more consecutive reporting periods, and where other enforcement measures have failed to ensure compliance, the competent authority of an EEA port of entry may issue an expulsion order. Where such a ship flies the flag of an EEA country and enters or is found in one of its ports, the country concerned will, after giving the opportunity to the company concerned to submit its observations, detain the ship until the company fulfils its monitoring and reporting obligations.
Per the EU’s Implementing Regulation, it is the Shipowner who remains ultimately responsible for complying with the EU ETS system.

There are a number of great resources on the regulatory and practical aspects of the system – none better than the EU’s own:

‍https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02003L0087-20230605

‍https://climate.ec.europa.eu/eu-action/transport/reducing-emissions-shipping-sector_en

‍https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/what-eu-ets_en

8th November 2021

P&I Mutual entries

No general increase ordered however the Board is targeting an increase in rates of +12.5%, this is subject to a focus on individual Member loss records and risk profiles.

FDD Mutual entries

No general increase ordered however the Board is targeting an increase in rates of +12.5%, this is subject to a focus on individual Member loss records and risk profiles.

The Board has met following on to the recently announced Supplementary Call revision on the three most recent policy years to set the requirements for the renewal at 20th February 2022. As a follow on to last announcement the decisions for renewal form part of the overall determination of the Board to take measures in order that the club delivers sustainable technical performance and financial resilience going forward.

In commenting with regards to the background the club notes,

The cost of Mutual P&I claims in the current year is at an elevated level. A high frequency of claims involving Covid-19 is a particular factor. The average severity of claims on the IG Pool is also unusually high and includes one claim brought by the Club.

The Club’s defensively positioned portfolio of invested assets has recorded a small positive return year-to-date. Planning for the 2022/23 renewal assumes a similar modest full-year return.

As noted above, the renewal strategy provides for no set general increase. In what is referred to as a ‘tailored approach to individual members” an underlying agenda target has been put forward wherein the club advises, “ the Board is targeting an increase in rates of 12.5%, this is subject to a focus on individual Member loss records and risk profiles. Rates and deductibles will be adjusted accordingly.”

Furthermore,

Any adjustment to the cost of the Club’s share of the International Group’s excess loss reinsurance programme, which has not yet been determined, will also be applied.

The renewal circular dedicates space also for the Class 8 (FD&D) requirements setting out,

“The incurred cost of claims after six months of the current year is one of the higher cost H1 periods in recent years, but not necessarily an outlier. There has also been an upward trend in FD&D claims costs over recent years, during which time premium levels have been under pressure. In the circumstances, the Board determined that as with the P&I Class no general increase is set and whilst it is targeting an increase in rates of 12.5%, this is subject to a focus on individual Member loss records and risk profiles. Ratings and deductibles will be adjusted accordingly.”

This Newsletter, and our information archive, can also be accessed at www.plferrari.com

P.L. FERRARI & CO S.r.l.

This Newsletter, and our information archive, can also be accessed at www.locktonplferrari.com

Lockton P.L. Ferrari & CO S.r.l.

Lockton P.L. Ferrari – A Member of the Lockton Group of Companies This newsletter is intended solely as an overview of the marine market and does not constitute any form of advice. It is based on sources believed to be accurate at the time of printing and we cannot be held liable for the omission of any information within the newsletter.

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General Increase Bulletin No. 7/21

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1st January 2024.

General Increase Bulletin No. 7/21

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1^st January 2024.