The UK ETS Authority is consulting on the inclusion of emissions from international maritime voyages starting or ending in the UK, with the expansion proposed to take effect from 2028.
According to the UK, international voyages would be subject to the UK ETS carbon price for 50% of their emissions, in line with the current EU ETS scope. The proposed expansion to international voyages would apply to ships already in scope of the UK ETS due to their domestic voyages or emissions in UK ports and would cover the same greenhouse gases.
Including 50% of emissions from international voyages is expected to be a significant driver for decarbonisation. As explained, it will ensure that 100% of emissions are covered on voyages between the UK and the European Economic Area (EEA), through the combined effect of the UK ETS and EU ETS.
The additional 50% coverage on other international routes will further support decarbonisation efforts. Impacts associated with this policy will be analysed as part of the Impact Assessment (IA) to be published alongside the Authority Response to this consultation.
The responses to this consultation will be used to develop final policy decisions regarding the expansion of the UK ETS to include emissions from international maritime voyages.
Potential impacts of UK ETS expansion to international maritime voyages
The Impact Assessment accompanying the main Authority Response on the expansion of the UK ETS to domestic maritime sets out the evidence on the expected impacts of domestic expansion. Benefits include greenhouse gas emissions savings and air quality benefits in the maritime sector, whilst costs include costs to maritime operators of investing in abatement technologies, administrative costs to operators of complying with the scheme, and the cost of buying UK ETS allowances. The proposed expansion of the scheme to UK international maritime voyages is expected to deliver similar impacts on greenhouse gas emissions savings and air quality benefits. However, the precise extent of this is uncertain, in part due to interactions between the UK ETS and EU ETS, and interactions between these schemes and the IMO NZF, which will both be subject to review following adoption of the IMO NZF to account for these interactions.
As the expansion to domestic maritime emissions includes all emissions produced in port domestically, regardless of the voyage, the proposed expansion to international maritime voyages would not bring any new maritime operators into scope. In addition, many operators will also be subject to EU ETS and IMO Data Collection System (DCS) requirements. Therefore, additional administrative costs from expansion to international maritime voyages are expected to be minimal. However, operators conducting both domestic and international voyages will see a greater proportion of their emissions covered by the UK ETS, which may increase their overall abatement and allowance purchasing costs.
Early evidence from the EU ETS expansion to maritime shows that there is limited evidence of route changes to avoid ETS coverage, however, there is some evidence of ships making additional ports of call in the UK to avoid paying full coverage on intra-European journeys. By expanding the UK ETS to cover 50% of international voyage emissions, this would remove the incentive for vessel operators to undertake additional ports of call in the UK, therefore reducing the risk of gaming and carbon leakage, though this could result in lower UK port activity.
Other evidence from the same EU report has shown that the additional costs imposed by the EU ETS on the transportation of goods via maritime are expected to be low, however, maritime operators have begun to implement surcharges to cover and pass-through these costs. The extent to which ETS costs are passed through to the final costs of goods is uncertain, but is expected to be minimal based on existing evidence, which is set out in the Impact Assessment for domestic maritime expansion.
Further evidence on the potential impact of the expansion of the ETS to domestic maritime is explored in the Impact Assessment. This evidence is broadly expected to also apply for the expansion to international maritime voyages. However, there may be some impacts that are of greater relevance to UK – international maritime voyage expansion, for example, impacts on international trade, and risks of modal shift from maritime to modes of transport not covered by the UK ETS.
