Shipping warned over risks of delaying EU allowance transfers

Nicosia, Cyprus. Shipowners and operators face increasing financial, commercial and compliance risks if they delay EU allowance transfers until September, according to EmissionLink managing director Philippos Ioulianou. He said shipping’s exposure under the EU Emissions Trading System is continuing to rise.

Deadline-related exposure

Ioulianou said the issue was not the September deadline itself, but the industry’s practice of waiting until the last possible moment. He said this could push critical funding and compliance decisions to the brink, leaving owners, managers and compliance providers with significant exposure.

Operators must surrender EU Allowances, or EUAs, covering their verified emissions before the end of September following the first FuelEU Maritime compliance cycle, he said.

Contractual arrangements

According to Ioulianou, existing practices between owners, charterers, managers and intermediaries can leave significant exposure unresolved until shortly before the deadline.

He noted that many charter parties, including those incorporating BIMCO emissions trading provisions, allow charterers to transfer EUAs relatively close to the surrender date. While such arrangements provide commercial flexibility, they can leave the party responsible for compliance exposed if allowances arrive late or are not transferred.

Owners may be reluctant to buy allowances because charterers are contractually liable, while charterers may delay transfers because the contract permits them to do so, Ioulianou said. The company responsible for compliance nevertheless remains accountable to the regulator, creating avoidable market risk, he added.

Rising EU ETS coverage

Ioulianou said the EU ETS covered 40 per cent of shipping’s verified emissions for 2024, with coverage rising to 70 per cent for 2025 and 100 per cent for 2026.

He said verified emissions reports should be treated as an early financial risk indicator rather than solely as part of an annual administrative process. Once verified emissions are known, owners and operators should quantify their EUA exposure, agree the allocation with charterers and set clear transfer dates well before September, he said.