What is the EU Emissions Trading System for shipping?

The EU Emissions Trading System (EU ETS) is the EU’s cap and trade carbon market, and since January 2024 it has covered ships of 5,000 gross tonnage (GT) and above calling at ports under the jurisdiction of an EU Member State, whatever flag they fly. For container shipping that captures essentially all deep sea vessels in the European trades. A shipping company must buy and surrender EU allowances (EUAs) for the emissions it reports, and may pass that cost on, so carbon now sits alongside bunker and terminal charges in a European booking.

How the carbon market reaches a liner service

The scheme is not a tax at a fixed rate. A cap sets the total emissions that covered sectors may release, allowances are issued against it and auctioned, and the cap falls over time so that emitting becomes progressively more expensive. Each allowance covers one tonne of reported CO2 equivalent, surrendered annually after verification.

Compliance sits with the “shipping company”, defined in the Directive as the shipowner, or the manager or bareboat charterer that has assumed responsibility for operating the ship under the ISM Code. Member State administering authorities police the obligation.

The 5,000 GT threshold is a volume measure rather than a cargo measure, and it should not be read across to TEU capacity: how container ships are sized sets out how those two scales relate.

What is counted, and where

Scope prices the European legs of international voyages rather than emissions released entirely outside the EU.

Voyage or activity	Share of emissions covered
Between a port under EU jurisdiction and a port outside the EU	50%
Between two ports under EU jurisdiction	100%
At berth and while moving within an EU port of call	100%

On gases, the scheme started with CO2 only in 2024 and 2025 and added methane and nitrous oxide to the shipping scope from 2026. Reporting runs under the EU’s MRV Maritime Regulation, revised when the ETS reached shipping.

The neighbouring transhipment port rule

The container sector has a provision of its own, because a box can be routed through a hub outside the EU en route to Europe. To stop lines from choosing a non-EU transhipment port simply to shorten the voyage that counts, the Directive lets the Commission identify “neighbouring container transhipment ports”. A port qualifies when more than 65% of its container traffic is transhipment, when it lies outside the EU but less than 300 nautical miles from a port under EU jurisdiction, and when its country does not apply measures equivalent to the ETS.

The Commission’s implementing regulation of 26 October 2023 listed Tanger Med in Morocco and East Port Said in Egypt. A stop at a listed port does not count as the start or the end of a voyage, so the leg into or out of the EU is not treated as a discounted 50% voyage. That is the provision that decides what a carrier is pricing on Mediterranean routings.

The phase-in, and why 2026 is the year it bites

Shipping companies had to surrender allowances for 40% of their 2024 emissions and 70% of their 2025 emissions, and from the 2026 emissions year the requirement is 100% of reported emissions. The first surrender fell due in September 2025, for the 2024 emissions year.

The calendar runs on MRV deadlines: an emissions report for each ship, verified and submitted through THETIS-MRV, is due by 31 March of the following year, and a Document of Compliance must be on board by 30 June. Failing to surrender brings an excess emissions penalty of EUR 100 per tonne of CO2 equivalent, corrected for inflation, on top of the obligation to surrender the allowances themselves, and the names of penalised companies are published. A company that fails for two or more consecutive reporting periods can face an expulsion order, under which Member States refuse entry to its ships.

What it costs a container shipper

Two numbers matter. The first is the allowance price, which is set by the market and moves with the cap and the wider energy and policy backdrop, so the EU publishes no rate per container. The second is the tonnage of CO2 that carrying a given box accounts for, which scales with distance and with the ship’s fuel efficiency. The carbon element in a box moving from Asia to North Europe is therefore materially larger than in a short sea leg, and it arrives as a small but variable part of the all-in rate.

The Directive also settles who can be asked to pay. Where responsibility for buying the fuel or operating the ship sits with another entity, the shipping company is entitled to reimbursement of the cost of the allowances. Member States must make that enforceable, and the Commission expects carriers and their customers to set out the detail in contract clauses rather than in standard text from Brussels.

A container’s share of the ship’s emissions is only meaningful per unit of cargo, which is where the TEU convention matters: two customers on the same vessel and voyage carry different shares of the same carbon bill. Carbon is also one input among many on a lane still moving on capacity and demand, as the recent read on Asia-Europe rates shows.

EU ETS is not the only rule

FuelEU Maritime applies from 1 January 2025 and caps the yearly average greenhouse gas intensity of energy used on board ships above 5,000 GT calling at European ports, on a well to wake basis, starting with a 2% reduction in 2025 and tightening afterwards. The ETS prices carbon; FuelEU sets a fuel standard.

Globally, the IMO’s 2023 greenhouse gas strategy targets net zero from international shipping by or around 2050, but no binding global carbon price is in force. Its Net-Zero Framework, a fuel standard plus a pricing mechanism, was finalised as draft legal text at MEPC 83 in April 2025, and the extraordinary session called to adopt it adjourned for a year to 2026. Its resumed session will decide whether a global price later overlaps with the EU scheme. Until then, the EU ETS is the only mandatory carbon price on a major container trade lane.

What to watch

• The July 2026 revision proposal. On 17 July 2026 the European Commission proposed a targeted revision that would strengthen the system for maritime transport, alongside a separate proposal on monitoring, reporting and verification of maritime emissions. It is a proposal, not law.
• Scheduled scope extensions. Offshore ships of 5,000 GT and above enter ETS scope from the 2027 reporting period, and inclusion of offshore and general cargo ships between 400 and 5,000 GT is to be considered in the ETS review.
• Allowance supply. The cap and the Market Stability Reserve determine how many allowances reach the market, the structural driver of the price per tonne.

Sources: European Commission, Reducing emissions from the shipping sector (updated 6 May 2026); the Commission’s FAQ on maritime transport in the EU ETS (phase-in, transhipment ports, reimbursement, penalties); the Commission’s EU ETS and FuelEU Maritime pages; International Maritime Organization, Cutting GHG emissions from ships.