Updates to UK Emission Trading Scheme (UK ETS)
Dear Valued ONE Customers,
The United Kingdom has published a circular regarding updates to the Emissions Trading Scheme (UK ETS). To ensure full compliance with the newly expanded United Kingdom Emissions Trading Scheme (UK ETS) regulations for the maritime sector, ONE will be incorporating these additional compliance costs into the existing EES structure.
We would like to seek your kind understanding and cooperation as we adapt to these evolving regulatory standards. By navigating these environmental requirements together, we can collectively achieve a sustainable and environmentally friendly world.
UK Emissions Trading Scheme (UK ETS) Overview
The UK ETS is a cap-and-trade system designed to reduce greenhouse gas (GHG) emissions by setting a limit on the total amount of emissions allowed from specific sectors. Following the UK Government's decision to expand the scheme, the maritime sector will be included starting July 1, 2026. The regulation applies to cargo and passenger ships of 5,000 gross tonnes (GT) and above from the commencement date, with offshore ships of the same size expected to be included from January 1, 2027.
Unlike the EU ETS, the UK ETS maritime expansion does not utilize a phase-in period. From the initial reporting year, 100% of in-scope emissions must be accounted for and paid for.
- Commencement Date: July 1, 2026.
- Initial Reporting Period: July 1 to December 31, 2026.
- Covered Gases: Carbon Dioxide (CO₂), Methane (CH₄), and Nitrous Oxide (N₂O) will all be included from the outset.
Geographical Scope
The UK ETS applies to emissions based on the vessel's voyage type and its activity within UK waters. The confirmed scope for the initial phase is as follows:
- 100% of emissions from domestic voyages: This includes port-to-port voyages within the UK (e.g., Southampton to Liverpool).
○ Note: A 50% reduction on the surrender obligation applies specifically to routes between Great Britain and Northern Ireland to align with competitive pricing. - 100% of emissions while at berth/in port: This applies to all emissions released while a vessel is moored or at anchor in a UK port, regardless of whether the vessel is on a domestic or international route.
Future phase:
- International Voyages: Currently, 0% of emissions from international voyages (UK to non-UK ports or vice versa) are in scope. However, a proposal is under consultation to include 50% of emissions from international voyages starting January 1, 2028, to align with the EU ETS model.
Compliance Cycle
Maritime operators are required to monitor, report, and verify GHG emissions annually. These verified emissions determine the number of UK Allowances (UKAs) that must be surrendered.
- Reporting Deadline: Verified emissions reports must be submitted by March 31st of the following year.
- Surrender Deadline: The annual deadline for surrendering UKAs is April 30th.
- Special Transition Rule: For the initial period, operators have until April 30, 2028, to surrender allowances covering both the 2026 and 2027 scheme years.
Failure to comply with these obligations will result in a penalty of £100 per tonne of CO₂ equivalent, in addition to the requirement to surrender the missing allowances.
As stated, UKAs are to be used for UK ETS compliance. Ocean Network Express is to purchase such UKAs based on the emissions in scope.
Tariff Calculation & Benchmark Logic
To maintain transparency and accurately reflect shifting market values, the EES tariff will be reviewed and refreshed on a quarterly basis. In determining the UK ETS cost component, our calculation logic will refer to the December Future Price of the UK Allowance (UKA) price tracker, sourced directly from the Intercontinental Exchange (ICE), as one of our primary benchmarks.
We thank you for your continued partnership and trust in Ocean Network Express. Should you have any questions or require clarification, please consult your dedicated sales representative or our customer service team.
Yours faithfully,
Ocean Network Express Pte. Ltd.