EU ETS and Shipping from 1 January 2026

From 1 January 2026, the European Union Emissions Trading System (EU ETS) enters its final implementation phase for maritime transport. What began as a partial, transitional regime in 2024 now becomes a fully operational compliance obligation for shipping companies calling at EU and European Economic Area (EEA) ports. 

For shipowners, charterers and their insurers, the 2026 changes significantly increase both financial exposure and operational risk, particularly in relation to emissions accounting, allowance procurement, and contractual allocation of liability. 

This article outlines the key regulatory changes, their implications for shipping companies, and practical strategies to manage the associated risks. 

What Changes from 1 January 2026? 

Full Emissions Coverage 

The most significant change is the move to 100% emissions coverage under the EU ETS. 

Following the phase-in period (40% in 2024 and 70% in 2025), shipping companies must now surrender EU Allowances (EUAs) covering all verified emissions within scope. This includes: 

• 100% of emissions from voyages between EU/EEA ports 

• 50% of emissions from voyages between an EU/EEA port and a non-EU/EEA port 

• 100% of emissions at berth in EU/EEA ports 

Expanded Greenhouse Gas Scope 

From 2026, the EU ETS for shipping covers not only carbon dioxide (CO₂), but also methane (CH₄) and nitrous oxide (N₂O). 

This is particularly relevant for vessels using LNG or other fuels with higher methane slip, potentially increasing compliance costs beyond earlier CO₂-only projections. 

The financial implications of full ETS coverage are already being felt. Market analysis indicates that ETS-related cost components embedded in EU-delivered marine fuels rose sharply at the start of 2026, reflecting the shift from partial to full allowance surrender obligations. An overview of these fuel cost impacts is available at: 

https://shipandbunker.com/news/emea/753774-eu-marine-fuel-cost-jumps-as-new-eu-ets-rules-take-effect-from-jan-1-2026 

Actual cost exposure will vary between operators and fleets, depending on fuel consumption, voyage profiles, EUA price volatility, and the timing and strategy adopted for allowance procurement.  

Given the permanent nature of EU ETS compliance, shipping companies are increasingly adopting a structured and multidisciplinary response. A key priority is the strengthening of emissions monitoring, reporting and verification (MRV) systems. Accurate alignment between onboard fuel data and verified emissions reports, timely engagement with accredited verifiers, and the maintenance of audit-ready documentation are essential to reducing compliance risk. Over time, investment in digital monitoring tools may help reduce administrative burden and minimise the risk of reporting errors. 

Contractual clarity is equally important. Owners and charterers are encouraged to review existing charterparties for gaps in ETS cost allocation and to incorporate updated ETS clauses in new fixtures. Clear drafting on responsibility for allowance procurement and surrender remains one of the most effective ways to reduce disputes and unintended liability. 

Financial planning also plays a central role. In light of EUA price volatility, companies may wish to develop internal procurement strategies, spread allowance purchases over time, and explore hedging solutions where appropriate. The cost impact of ETS compliance is no longer marginal, and allowance management is increasingly becoming a core commercial consideration. 

Finally, operational efficiency continues to offer a direct means of reducing ETS exposure. Measures such as voyage and speed optimisation, hull and propeller performance management, and improved weather routing can reduce fuel consumption and, in turn, emissions liabilities under the ETS. Even incremental efficiency gains may translate into meaningful cost savings under a regime of full emissions coverage. 

Taken together, the changes effective from 1 January 2026 mark the conclusion of the EU ETS transitional phase for maritime transport and the start of full compliance obligations for shipping companies trading to and from Europe. Although further regulatory developments can be expected, ETS compliance is now a core and continuing consideration for emissions, costs and contractual risk allocation. Companies that embed robust emissions reporting, contractual clarity and operational efficiency into their risk-management approach will be better placed to navigate both current obligations and future regulatory change. 

If Members have any questions in relation to such issues they are invited to contact their usual club contact for further assistance.