EU Emission Trading System (EU ETS)

The EU ETS is an emission cap-and-trade system where a limited amount of emission allowances (the cap) is put on the market and can be traded. To guarantee that the European Union meets its goal of reducing emissions by 55% relative to 1990 levels and transitioning to climate neutrality by 2050, the cap is reduced annually.

The European Parliament (EP), Council of the European Union, and the European Commission have reached an agreement on including shipping in the EU’s Emission Trading System (EU ETS) from 2024.

Starting in 2024, the EU ETS mandates that all businesses operating ships within the European Union and Economic Area must surrender emissions allowances corresponding to their GHG emission levels. This data will be reported and verified through an updated version of the current MRV (Monitoring, Reporting and Verification) system which covers essential GHG emissions, vessel types and sizes.

From 2024 the EU ETS will include CO2 emissions only, while the EU MRV will be extended the same year to include reporting of methane (CH4) and nitrous oxide (N2O) which are two other greenhouse gases (GHG) emitted by ships. From 2026 the EU ETS will also include these two GHGs.
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