UK ETS is on the horizon

In accordance with The Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026, the UK Emissions Trading Scheme (“UK ETS”) will extend to the maritime sector from 1st July, 2026. This will be a significant regulatory change for ship operators calling at UK ports. The UK ETS largely mirrors the EU ETS and is a cap-and-trade system that puts a price on greenhouse gas emissions and is intended to encourage efficiency improvements, alternative fuels and investment in cleaner maritime technologies.

Scope

When it comes into force on 1st July, 2026, the UK ETS will apply to ships of 5,000GT and above, covering emissions of CO₂, methane and nitrous oxide.  

The scheme applies to (i) domestic voyages between UK ports (including round trips to the same port) and (ii) emissions while at berth or at anchor in a UK port area, regardless of whether the overall voyage is domestic or international. Emissions will be assessed on a tank-to-wake basis, in line with the EU ETS.

Trading allowances

The UK ETS sets a fixed cap on total emissions, designed to reduce over time. Rather than prescribing how each operator must reduce emissions, it allows participants to trade allowances so the market can identify the lowest-cost route to compliance.

In practical terms, trading can reduce overall compliance costs by allowing efficient operators to sell surplus allowances and others to buy allowances where operational changes are not immediately cost-effective.

Compliance

Key requirements placed on operators under the UK ETS are to:

1. prepare a regulator approved (or otherwise accepted) Emissions Monitoring Plan (EMP);
2. monitor and keep records of fuel use and resulting emissions in accordance with the prescribed monitoring, reporting and verification (MRV) rules;
3. submit an annual emissions report by the deadline of 31st March of the following year; and
4. surrender allowances equal to the verified emissions by 30th April of the following year.

The EMP should set out the ship(s) covered, the chosen monitoring methodology, data sources and responsibilities (onboard and ashore), quality-control checks, and how data will be stored and evidenced.  Approval of the EMP should be obtained from the relevant regulator, depending upon where in the UK the operating company is based, as follows:

• England: Environment Agency;
• Scotland: Scottish Environment Protection Agency;
• Wales: Natural Resources Wales; and
• Northern Ireland: Northern Ireland Environment Agency.

For overseas operators who do not have a registered office in the UK, the Environment Agency is the relevant regulator.

By default, the registered owner of the ship is the ‘maritime operator’ for the purpose of the scheme and is responsible for compliance. However, responsibility may be transferred to an ISM company where there is a binding, written agreement in place which has been provided to the regulator. The agreement should clearly state responsibility for (i) maintaining the EMP, (ii) monitoring and storing data, (iii) submitting reports and (iv) purchasing and surrendering of allowances.

The reporting period under the scheme is annual and based on a calendar year (1st January to 31st December), although the initial period will be from 1st July, 2026 to 31st December, 2026. In addition, to assist operators with implementation of the scheme, a “double surrender” concession will apply to the 2026 and 2027 reporting years. This means that, while operators must still submit annual emissions reports by 31st March 2027, the allowance for the 2026 reporting period will not need to be surrendered until 30th April, 2028, at the same time as the 2027 allowance.

Key considerations

Operators should identify ships of 5000GT and above that will be calling at UK ports and apply for an EMP for collecting data. Another important step is to review charterparty clauses and management agreements to detail allocation of costs between the parties and obligations in terms of data sharing, verification and reporting.

As always, if Members have any questions in relation to the above issues they are invited to contact the Club for further information.