Under time charters, voyage charters, COAs, bareboat charters or ship management arrangements, owners, managers, charterers and operators may each control different parts of the operation: one party owns the ship, another is responsible for ISM management, another decides routing, speed or bunkering, and another ultimately bears the related costs.
When discussing EU ETS compliance responsibility under a charter structure, it is therefore important to distinguish two levels: regulatory compliance responsibility, and commercial cost allocation.
1. Who is the shipping company under the EU ETS?
Under the EU ETS/MRV framework, the entity carrying the compliance obligation is generally referred to as the shipping company.
According to the European Commission FAQ, the shipping company may be the registered owner, or a manager, bareboat charterer or other organisation or person that has assumed responsibility for the operation of the ship from the owner and has taken over the duties and responsibilities under the ISM Code.
Where an ISM company carries the EU ETS/MRV obligation, documentation is normally required to show that it has been authorised by the owner to assume that obligation. BIMCO's explanatory notes on the SHIPMAN ETS clause also note that the relevant EU rules require the responsible organisation or person to provide the administering authority with documentation showing that it has been mandated by the owner to take on the EU ETS obligation.
Under a charter or management structure, the first point to confirm is therefore which party acts as the shipping company and carries EU ETS/MRV compliance responsibility externally.
2. Regulatory responsibility and commercial cost allocation are not the same thing
Under the relevant provisions of Directive (EU) 2023/959, where responsibility for the purchase of fuel or for the operation of the ship, or both, is assumed by an entity other than the shipping company under a contractual arrangement, the shipping company is entitled to reimbursement from that entity for the costs arising from the surrender of allowances. At the same time, the shipping company remains the party responsible for surrendering allowances and for overall compliance.
Who pays commercially should not affect completing compliance on time from a regulatory perspective.
3. What to focus on under different charter structures
Under a time charter, the charterer usually has considerable influence over routing, speed, cargo arrangements and fuel use. Owners and charterers should therefore agree in advance on emissions data sharing, calculation of EUA volumes, and allowance transfer or cost settlement mechanisms. BIMCO's notes on the time charter ETS clause likewise stress that owners and charterers should cooperate and exchange relevant data and information in good time so that the number of allowances to be surrendered for the charter period can be calculated.
Under a voyage charter or COA, companies need to focus on how EU ETS costs for the specific voyage or transport arrangement are reflected in freight, surcharges or allowance transfer mechanisms. BIMCO has also published ETS clauses for voyage charters and COAs dealing with allowance transfer, cost allocation and actual delivery of allowances.
Under a bareboat charter or ship management arrangement, the key questions are who carries ISM responsibility, who is authorised to act as the shipping company, who is responsible for THETIS-MRV reporting, who opens the MOHA account, and who ultimately carries out the EUA surrender. BIMCO's notes on the BARECON ETS clause likewise show that bareboat arrangements need to address the costs and allocation of responsibility for obtaining, transferring and surrendering allowances.
The points of focus differ between charter structures, but the underlying logic is the same: regulatory responsibility, data responsibility, account responsibility and cost responsibility all need to be set out in advance.
4. What should be clarified in the contract?
Under a charter structure, the main risk to EU ETS compliance is that "everyone knows the rules, but no one is responsible for carrying them out".
When entering into or updating a charter party, ship management agreement, COA or sale and purchase arrangement, the following should therefore be clarified in advance as a minimum:
- First, which party acts as the shipping company under the EU ETS/MRV.
- Second, who is responsible for MRV data collection, THETIS-MRV submission and company-level reporting.
- Third, who is responsible for MOHA account management, EUA procurement, allowance transfers and the final surrender.
- Fourth, who bears the EUA cost, and whether this is settled through physical allowance transfer or monetary settlement.
- Fifth, when emissions data is to be provided, who checks it and on what basis.
- Sixth, how responsibility periods are divided in the event of a sale and purchase, change of manager, sub-charter or early redelivery.
- Seventh, who bears the risk arising from data errors, late payment, allowances not being transferred in time or a late surrender.
5. When a ship changes hands, responsibility for earlier periods remains
Sale and purchase, change of manager, ISM changes or changes of responsible entity are common under charter structures, and they affect the handover of emissions data and the allocation of compliance responsibility.
The EMSA FAQ gives the example of a ship transferred from company A to company B on 1 April 2025: in 2026, company A must still surrender allowances for the relevant emissions of that ship between 1 January 2025 and 1 April 2025.
A change of responsible entity does not in itself remove compliance responsibility for earlier periods. A company still has to organise the corresponding emissions data, report submission and EUA surrender for the period for which it was responsible.
Conclusion
EU ETS compliance responsibility cannot stop at contract wording; it has to be carried through into data, accounts, allowances and the surrender process.
The ultimate objective of EU ETS compliance is not "buying EUAs", but completing the allowance surrender cycle before the deadline. If you have requirements relating to EUA procurement or allowance demand assessment, you are welcome to contact Tecway Maritime.
References
- European Commission, FAQ - Maritime transport in EU Emissions Trading System
- Directive (EU) 2023/959
- European Maritime Safety Agency, FAQ ETS Regulation
- BIMCO, ETS - Emission Trading Scheme Allowances Clause for Time Charter Parties 2022
- BIMCO, ETS - SHIPMAN Emission Trading Scheme Allowances Clause 2023
- BIMCO, ETS - Emission Scheme Transfer of Allowances Clause for Voyage Charter Parties 2023
- BIMCO, ETS - BARECON Emission Trading Scheme Allowances Clause 2026
This article is a general explanation of EU ETS compliance responsibility and commercial cost allocation and does not constitute legal advice; specific charter terms and disputes should be assessed by professional legal advisers on the basis of the contract text and applicable law.