1. Introduction
It is recognized that shipping transportation is an essential facility for the existence of the global economy and the global trade of goods. However, it faces ecological difficulties due to the rising fuel costs and environmental pressures, especially in the case of maritime transportation – according to the Fourth Green House Gas Study of the International Maritime Organization (IMO), approximately 2.5 percent of greenhouse gas emissions worldwide are caused by maritime transportation, which produces roughly 940 million tons of CO2 yearly.
To attain climate neutrality in the EU by 2050, the European Commission issued several legislative measures to obtain an intermediate goal of reducing greenhouse gas emissions by at least 55% net by 2030 when compared to 1990 levels. There have been several legislative proposals for amending existing EU legislation to ensure the energy transition for shipping transportation, such as specific provisions in the Renewable Energy Directive, the Fuel EU Maritime Regulation, Directive on Deployment of Alternative Fuels Infrastructure.
The present blogpost focuses specifically on the legislative reform concerning the inclusion of shipping in the EU ETS regime, more precisely on the Regulation 2015/757 of the European Parliament and of the Council of 29 April 2015 on the monitoring, reporting, and verification of carbon dioxide emissions from maritime transport, also known as the MRV Maritime Regulation.
Publishing our analysis on this regulation seemed coherent to us, once it is a regulation that implants loads of new obligations to companies and State Members, making it possibly hard for them to comply entirely and completely with the regulation. It is also important to continue updated on all changes in this type of regulation, for a better analysis of the left ones, building a constructive criticism in our future articles.
2. MRV Maritime Regulation
Nowadays, ships that load or unload cargo at ports within the European Economic Area (EEA) are required to monitor and report related greenhouse gas emissions. The information must be Monitored, Reported, and Verified (MRV) as stated in the MRV Maritime Regulation.
In 2023, the MRV Maritime Regulation underwent revisions due to the incorporation of emissions from maritime transport into the EU’s Emissions Trading System (EU ETS). Under the EU ETS system, shipping businesses are required to purchase and relinquish (use) EU ETS emission allowances for each tone of reported CO2 (or CO2 equivalent) emissions – using the same regulations as the other ETS sectors, it is the responsibility of the administering agencies of EU member states to guarantee compliance.
2.1. Monitoring
The primary responsibility for companies eligible under the MRV Maritime Regulation is monitoring: monitoring the emissions means that it is expected by the companies that, by one of the four monitoring methods (the use of Bunker Fuel Delivery Notes, bunker fuel tank monitoring on-board, flow meters for applicable combustion processes or direct emission measurements), the companies will present a monitoring plan consisting of a complete and transparent that contains elements such as the identification and type of the ship, the ice class of the ship, company’s data, description of the gases emissions sources, the methodologies for determining the emission factors, description of the procedures used to monitor the completeness of the list of voyages and for monitoring the fuel consumption of the ship, a revision record sheet to record all the details of the revision history, between others.
The first change was on the type of ships covered by the EU’s Emissions Trading System (EU ETS), which was expanded to cover emissions from all large ships (of 5,000 gross tons and above) visiting EU ports, regardless of the flag they fly, which took effect on January of 2024.
This way, article 2, paragraph 1 states that the regulation applies to “ships of 5,000 gross tonnage and above in respect of the greenhouse gas emissions released during their voyages for transporting for commercial purposes cargo or passengers from such ships’ last port of call to a port of call under the jurisdiction of a Member State and from a port of call under the jurisdiction of a Member State to their next port of call, as well as within ports of call under the jurisdiction of a Member State.”
In addition, the same article defines that from 1 January 2025, general cargo ships between 400 and 5000 gross tonnage and offshore ships of 400 gross tonnage and above fall under the scope of the amended MRV Regulation.
The other big change was in January of 2024 as well, where takes place the coverage of emissions of CH4 (methane), and N20 (nitrous oxide), besides the already coverage of emissions of CO2. This way, when the Regulation refers to total aggregated emissions of greenhouse gases or total aggregated greenhouse gas emitted, it shall be understood as referring to the total aggregated amounts of each gas separately.
Article 6 of the Regulation added a term for the companies whereby 1 April 2024, “companies shall, for each of their ships falling within the scope of this Regulation, submit to the administering authority responsible a monitoring plan that has been assessed as conforming with this Regulation by the verifier and that reflects the inclusion of CH4 and N20 emissions”
To face these alterations, by 1 January 2024, shipping companies should revise the monitoring plan of each of their ships to conform with the requirements of the amended MRV Regulation – revised monitoring plans must first be assessed by an independent accredited verifier, as established by the recently added paragraph 7 of article 6.
Additionally, if a ship calls a port in the EEA for the first time after 1 January 2024, the company should submit its monitoring plan not later than three months after this first call.
Afterwards, if the assessment shows that the plan conforms, companies must submit the revised plan in THETIS-MRV no later than 1 April 2024, for approval by the responsible administering authority, in like manner added in article 6, current paragraph 6.
2.2. Reporting
Past the monitorization, the companies must report, which consists of submitting to the Commission and the authorities of the flag States concerned an emissions report concerning the greenhouse gas emissions and other relevant information such as data identifying the ship and the company, the identity of the verifier that assessed the emissions report, information on the monitoring method used and the related level of uncertainty and the results from annual monitoring of the parameters for the entire reporting period (one calendar year) for each ship under their responsibility.
This way, by 30 June of each year, companies must make sure that all their ships that have performed activities in the previous reporting period and are visiting ports in the European Economic Area have a document of compliance on board, and, by 30 April of each year, companies must submit a satisfactorily verified emissions report to the Commission and to the States in which those ships are registered (the “flag States”).
The Commission releases a report each year to update the public on the fleet under observation’s energy efficiency and greenhouse gas emissions: the scheme covers 100% of emissions between two EU ports and when ships are within EU ports. It also covers half of the emissions during trips beginning or terminating outside of theEU, allowing the third country to determine appropriate action for the remaining share of emissions.
2.3. Verifying
The last phase is the verification, when a verifier accredited by a national accreditation body assesses the conformity of the documents transmitted by the company with the requirements of the regulation – the verifier shall assess the conformity of the monitoring plan and the conformity of the emissions report.
Another adjustment is that another entity enters “on board”: each company will be associated with the administering authority of one Member State: by 1 February 2024, and every two years thereafter, the European Commission will publish a list attributing each company to the administering authority of one Member State.
From 2025, by 31 March of each year, companies must, for each ship under their responsibility, submit an emissions report for the entire reporting period of the previous year, which has been verified as satisfactory by a verifier by Article 13 of the MRV Regulation. The emissions report must be submitted through THETIS-MRV to the administering authority, the authorities of the ship’s flag State (if it is an EEA member state), and the European Commission, as Article 11 states. The responsible administering authority may require companies to submit their emissions reports earlier than 31 March, but not earlier than 28 February.
2.4. Enforcement
As any efficient regulation demands, there’s a need to establish a system of penalties for failure to comply with the monitoring and reporting obligations. The Member States must set up this system effectively, proportionately, and dissuasive way, as Article 20 of the MRV Regulation states.
Article 20 establishes that in the case of a ship that has failed to comply with the monitoring and reporting obligations for two or more consecutive reporting periods, and where other enforcement measures have failed to ensure compliance, the competent authority of the Member State of the port of entry may, after allowing the company concerned to submit its observations, issue an expulsion order, which shall be notified to the Commission, the European Maritime Safety Agency (EMSA), the other Member States and the flag State concerned.
Nonetheless, the shipowner or operator of a ship or its representative in the Member States shall have the right to an effective remedy before a court or tribunal against an expulsion order and shall be properly informed thereof by the competent authority of the Member State of the port of entry. Member States shall establish and maintain appropriate procedures for this purpose.
Meanwhile, as a result of the issuing of such an expulsion order, every Member State, except for the Member State whose flag the ship is flying, shall refuse entry of the ship concerned into any of its ports until the company fulfills its monitoring and reporting obligations by Articles 11 and 18. If such a ship flies the flag of a Member State and enters or is found in one of its ports, the Member State concerned shall, after allowing the company concerned to submit its observations, detain the ship until the company fulfills its monitoring and reporting obligations.
3. Conclusion
It is important to remember that, according to our reflection, maritime transportation regulation still has a lot to improve and change. Yet, it is our view that these adjustments were important to ensure that the regulatory process is nearly complete, that covers not only all subjects (as happened with the extension of ships covered) but also all threats to the European Climate Neutrality (as the other greenhouse gases, besides the CO2) – example
The more regulated, the better. The European Union has been striving for increased regulation in recent years, while also acknowledging the need for companies to adjust to these changes and providing the necessary support. Nevertheless, it is relevant to point out that in Member States that have maritime transportation as an immense part of their economy, these strong regulations can be harmful. Portugal is an example of that.
It is also arguable that given that the EU is an enormous port for third-party ships, it’s a way for the European Union to contribute and regulate indirectly states that do not have climate neutrality as one of their priorities. Considering this, the EU must legislate in an enabling way, which not only encourages third-party States to adopt and embrace the Regulation but also not repel it, by gradual regulations and even some type of agreements with the main third states that stop the Member States’ ports. This way, the European Union should adopt a gradual regulation followed by a tax incentive, already practiced by some non-EU countries — if the third countries don’t follow the regulation within the timing, there will be harder taxation.
