Post Brexit development of UK's own emission trading scheme set to include vessels on domestic voyages
A UK review of how it can bring domestic shipping into its national emission trading scheme has drawn to a close. Following its departure from the European Union the UK has been developing its own raft of regulations, and this includes the development of a national emissions trading scheme.
Ahead of Brexit land based heavy emitters were subject to the European ETS, but with Brexit the country’s own scheme began.
The government has been running a consultation period asking for input on proposals for the expansion and development of its ETS, and this includes the inclusion of its domestic shipping into scheme.
Domestic shipping would be for any vessels when on voyages between two UK ports (though not voyages to or from crown dependencies or oversea territories) and vessels over 5,000 gross tonnage.
In June 2021 the UK legislated for its sixth carbon budget, for the period 2033 to 2037, to reduce its greenhouse gas emissions by 77% compared to 1990 levels ( 965,000,000 tonnes of carbon dioxide equivalent /WHERE Methane 1 tonne CH4 equals 34t CO2 and 1 ton NH2 equals 298t CO2), This budget included domestic shipping which it reckoned accounted for 4% of its emissions
Within the consultation there are three options on how domestic shipping could be included, and in each the responsibilities for compliance vary
The main option would put the onus on compliance with shipowners and operators (possibly including commercial charterers) where they are expected to monitor and report fuel used on voyages on domestic voyages and thus the liable emissions, This would be a same process used in Europe for the MRV (monitoring, reporting and verification) requirements which have been brought into UK law already.
Responsible entities would be expect to then apply for allowances under the trading scheme and where needed trade them on the UK ETS auction platform
The second option being considered within the consultation is similar to a levy, where bunker suppliers, when supplying conventional bunker fuels would be mandated to apply the levy and pass this on.
There have been noted that if this was the case, bunker suppliers who sell more than 450,000 litres of fuel could be subject to the UIK’s renewable Transport Fuel Obligation where 5% of the fuel supplied comes from renewable and sustainable sources.
The third proposal is seen as a hybrid approach of the first two where some smaller vessels would be subject to a levy on fuels and larger vessels expected to monitor and report emissions and then be subject to the trading of allowances.
The consultation runs parallel to other moves from the European Union to include shipping in its long-standing emissions trading scheme, work at the IMO to achieve something similar for international shipping and nascent work within other countries, including China, Australia and the US.
