From 1 July 2026, the UK Emissions Trading Scheme (UK ETS) will formally extend to shipping. Eligible maritime operators will be required to apply for an emissions monitoring plan, monitor emissions data, have their annual reports verified, and surrender allowances in line with the rules.
UK ETS compliance is not a single "buy allowances" action. It is an interconnected chain of obligations, and a delay or failure at any single step can trigger regulatory action and civil penalties.
Key dates in the first shipping compliance cycle
The first compliance year for shipping under the UK ETS runs from 1 July 2026 to 31 December 2026.
Maritime operators must submit their verified 2026 annual emissions report, certified by an independent verifier, by 31 March 2027.
To accommodate the first inclusion of shipping, the UK government has set out a "two-year unified surrender" arrangement: UK Allowances (UKAs) corresponding to 2026 emissions do not need to be surrendered in 2027. Instead, they are surrendered together with UKAs for 2027 emissions, by 30 April 2028.
It is important to note that the deferral of the surrender deadline does not defer monitoring and reporting obligations. The 2026 annual emissions report must still be verified and submitted on time.
1. Failure to apply for an EMP, to monitor or to report can lead to fixed and daily penalties
Under the UK's current maritime UK ETS regulations, the following actions may each constitute non-compliance:
- Failing to apply for an Emissions Monitoring Plan (EMP) on time;
- Failing to submit a revised EMP application as required;
- Failing to comply with the conditions attached to the EMP;
- Failing to monitor vessel emissions in accordance with the EMP and related rules;
- Failing to submit the verified annual emissions report on time.
For these types of non-compliance, maritime operators may face:
- A £20,000 fixed penalty; and
- After an initial notice from the regulator, additional daily fines of £500 per day, capped at £45,000 in total.
In other words, once an operator has been served notice and still fails to rectify the breach in time, the penalty amount can keep increasing with each day of delay.
2. Not submitting an emissions report does not pause emissions liability
If a maritime operator fails to submit its annual emissions report as required, the regulator may determine the operator's emissions on its own.
In doing so, the regulator must use assumptions that avoid under-estimating emissions. This means that any regulator-determined figure may be relatively conservative, and that the absence of operator data or a missed report will not reduce compliance liability.
The emissions figure determined by the regulator can be used to:
- Calculate the number of UKAs the operator must surrender;
- Establish whether there is an allowance shortfall;
- Calculate the corresponding civil penalties;
- Update compliance records in the UK ETS Registry.
From a cost-control perspective, building a complete and verifiable data chain proactively is normally more favourable than passively accepting a regulator-determined figure.
3. Failing to surrender enough UKAs means paying penalties and still topping up allowances
Maritime operators must surrender, by the deadline, an amount of UKAs that corresponds to their compliance emissions.
If an operator fails to surrender enough allowances on time, each missing UKA may attract an excess emissions penalty of £100 multiplied by the applicable inflation factor.
Critically, paying the penalty does not replace the surrender obligation.
Even where an excess emissions penalty has been paid, the operator must still surrender the UKAs that were previously not surrendered. In other words, the penalty liability and the allowance top-up obligation exist at the same time.
For example, if a maritime operator is required to surrender 10,000 UKAs but has only surrendered 9,000 by the deadline, leaving a shortfall of 1,000 UKAs, that operator will not only owe an excess emissions penalty on those 1,000 missing units, but must also still acquire and surrender the 1,000 outstanding UKAs. The penalty does not substitute for the surrender.
Penalties should therefore not be treated as just another "price of compliance", and certainly not as an alternative to purchasing UKAs.
4. How operators can reduce the risk of non-compliance in advance
For companies that may fall within the scope of UK ETS maritime, the following preparations should be prioritised now.
1. Confirm the responsible party early
Clarify whether the Registered Owner or an eligible ISM Company will take on UK ETS compliance responsibility, and make sure the relevant legal agreements and internal authorisations are clear and effective.
2. Progress EMP application and system account opening
Engage with the relevant maritime regulator as early as possible to open a METS account and submit the EMP application. Once the EMP is approved, the UK ETS Registry will open a Maritime Operator Holding Account (MOHA) for the relevant entity.
3. Build a robust data management framework
Define how data flows and is cross-checked between vessels, ship managers, owners, verifiers and compliance service providers, so that fuel consumption, voyage information, in-port emissions and greenhouse gas data are traceable.
4. Plan UKA purchases in advance
Although the deadline for surrendering 2026 allowances is deferred to 30 April 2028, operators can begin purchasing UKAs as soon as their MOHA is operational.
Operators can choose between a single purchase, phased purchases or partial forward price locks, based on their expected emissions, UKA market prices and their own risk appetite — avoiding the market risk that comes with concentrated buying close to the compliance deadline.
5. Add the key dates to the internal compliance calendar
At a minimum, the following dates should be flagged:
- 1 July 2026 — shipping formally included in UK ETS;
- 31 March 2027 — submission of the verified 2026 annual emissions report;
- 31 March 2028 — submission of the verified 2027 annual emissions report;
- 30 April 2028 — unified surrender of UKAs for both 2026 and 2027 emissions.
If you have requirements around UKA purchases, allowance demand modelling or annual compliance arrangements, you are welcome to contact Tecway for further discussion.
References
1. The UK Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026 (SI 2026 No. 392), which sets out maritime operators' obligations and civil penalties in respect of EMP applications, monitoring, reporting and allowance surrender.
2. Article 52 of the Greenhouse Gas Emissions Trading Scheme Order 2020, which sets the excess emissions penalty for missing allowances at £100 per allowance multiplied by the inflation factor.
3. The UK ETS Authority's final policy document on the domestic shipping extension, which confirms the 1 July 2026 start date, the first reporting deadline and the "two-year unified surrender" arrangement for 2026 and 2027.
4. The UK government's UK ETS participation guidance, which describes METS, the preparations required for maritime operators to open accounts, and the basic functions of the UK ETS Registry.
Note: this article is based on UK regulations and policy documents publicly available as of June 2026 and is provided for general information only.
UKA compliance consulting — please contact Tecway
Ms. Madelena Ko — Carbon Trading and Green Fuels
EEX (European Energy Exchange) Trader
BSI (British Standards Institution) Greenhouse Gas Practitioner
Email: madelena.ko@tecwayintl.com