UK Government releases interim response to consultations regarding the UK Emissions Trading Scheme expansion to maritime

The UK Emissions Trading Scheme Authority (consisting of the UK Government and relevant devolved administrations) (the Authority) has released an interim response (the Response) following its November 2024 consultation which considered implementing the UK Emissions Trading Scheme (the UK ETS) for the maritime sector and the potential further expansion of the UK ETS to additional maritime emissions. Crucially, the Response clarifies that the UK ETS maritime regime will launch on 1 July 2026.

• Consultation scope
• The Response
• Next steps

Consultation scope

The Consultation was split into two sections. Section A sought input regarding implementation of the UK ETS for maritime, consulting in detail on the implementation of the scheme and providing more detail on previously announced changes, including the gross tonnage threshold at which vessels fall within the scheme. Section B focused on the potential further expansion of the UK ETS to encompass additional maritime emissions, including a proposal to review the threshold by 2028 and to consider how a proportion of international emissions could be brought into scope in future, should action from the International Maritime Organization (the IMO) be delayed or prove insufficient.

The Response

Following its review of responses to the Consultation, the Authority has finalised certain elements of its approach to enable shipowners and operators to prepare for compliance. The key decisions are as follows.

1. Expansion of UK ETS to maritime from 1 July 2026

   The Authority confirmed that the UK ETS will expand to maritime from 1 July 2026, with all compliance obligations applicable from this date for vessels of 5,000 GT and above. The first scheme "year" will run from 1 July 2026 to 31 December 2026, whereas future scheme years will run in line with the calendar year.

2. Emissions in scope

   The Authority confirmed that emissions in scope are those from "domestic voyages". The definition is confirmed by the Authority as voyages travelling from one UK port to another UK port, as well as voyages which start and end at the same port in the UK and is inclusive of all emissions within a voyage between ports of call, including while at anchor and while moored. The Authority recognises clarity is required in respect of emissions at anchor and defining the start and end points of a voyage, both of which will be addressed in future guidance.

   The Authority also confirmed that emissions of methane and nitrous oxide, which occur from the combustion or slippage of these gases as part of maritime activity, in addition to carbon dioxide, are in scope. The Authority explained its intent here is in part to avoid operators switching to fuels with lower carbon dioxide, but higher methane or nitrous oxide, emissions.

3. Government non-commercial maritime activity exempt

   Consistent with the approach taken to aviation, government non-commercial activity will be exempt from the UK ETS. Moving away from the umbrella term of "government non-commercial", the Authority confirmed that the following activities will be exempt:

   • - Military activities;
   • - Customers / Border Force activities;
   • - Police activities;
   • - Coastguard and other government search and rescue activity;
   • - Emergency / medical ships;
   • - Government research activities; and
   • - General Lighthouse Authority activity.

   Further detail of all exempted maritime activity will be outlined in forthcoming legislation. Vessels performing exempted activities are still expected to decarbonise their operations in line with net zero commitments.

4. Existing UK ETS regulatory regime to be extended to maritime

   Taking an industry agnostic approach, the Authority confirmed that the existing UK ETS regulatory regime will be extended to maritime. The regulatory regime provisions include:

   • - UK ETS year: being the calendar year, however in respect of expansion to maritime, the first scheme "year" will run from 1 July 2026 to 31 December 2026.
   • - Compliance dates: participants must submit verified reports by 31 March and surrender allowances by 30 April.
   • - Content of the emissions monitoring plan (the EMP): the EMP is a document detailing how the responsible party will monitor, record, and report their emissions.
   • - Penalties regime: non-compliance with the UK ETS - such as operating without a required permit or failing to submit a verified emissions report - risks incurring civil penalties.
   • - Applicable regulator: regulators are specific to each UK nation. For England, the relevant regulator is the Environment Agency.
5. Further details on the monitoring, reporting and verification requirements

   The Authority has confirmed the principles of the UK scheme for monitoring, reporting and verifying emissions (the UK MRV) will broadly be used as the basis for the UK ETS monitoring, reporting and verifying emissions requirements (the UK ETS MRV). It is to be noted that the requirements of the UK MRV will remain distinct from those of the UK ETS MRV. While the full UK ETS MRV scope will be outlined in the full consultation response, the Authority confirmed requirements will include the monitoring and reporting of in port emissions, whether travelling domestically or internationally, as well as the monitoring of emissions of methane and nitrous oxide, in addition to carbon dioxide.

6. Responsibility for compliance

As a general rule, the entity responsible for compliance with the UK ETS is the registered owner of a vessel, except where such responsibility has been delegated by a legally binding agreement to an entity which has assumed responsibility for the vessel's operation and the duties imposed by the UK ETS (the ISM Company). Where responsibility is delegated to the ISM Company, evidence of the aforementioned agreement will be required to the satisfaction of the relevant regulator.

Next steps

The Authority has confirmed a full response to the remaining questions will be issued in due course.