Russian Sanctions and price cap attestation update

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

We refer to our Newsletter 6/22 Newsletter 06-22 where we refer to the entry in force of the Price Cap scheme regulating the transport on tanker vessels of Russian crude oil and petroleum products.

The P&I cover continues to be subject to various compliances from the Members, mainly referring to providing appropriate attestations that they have not violated the scheme indicated by the Price Cap Coalition (G7, Australia and the EU).

We are now informing all our readers that a new scheme on Price Cap rules has been published and it is designated to support the implementation of the Price Cap and disrupt any attempt of circumvention to use opaque shipping costs to hide the purchase of oil or petroleum products above the cap.
The changes adopted by the Price Cap Coalition will come into effect on 19th February 2024 (UK and US) and for cargoes loaded on or after 20th February 2024 (EU).

The two key changes are:

‍ 1. A requirement for attestations to be provided on a ‘per-voyage’ basis (the attestations provided by shipowners to P&I Clubs must be submitted within 30 days of loading). No Cover will be available unless an attestation is provided within this timescale. Annual attestation will no longer be acceptable.
2. Itemised price information for ancillary costs. Also, for this compliance, Members must ensure that they have a right to ancillary costs information within 30 days in order to comply with the obligation to their Club and avoid potentially jeopardising their P&I cover.

We submit, for your prompt guidance, the Circular issued by your P&I Club of reference, including as well the Price Cap Attestation to be submitted directly to your P&I Club.

We then remind all our readers that trade involving Russia continues to be subject to significant legal restrictions and all operators involved in this trade are encouraged to conduct thorough due diligence on the parties, cargoes, and trade before taking any contract/voyage to, through, or from Russia.

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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Russian Sanctions and price cap attestation update

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

Russian Sanctions and price cap attestation update

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