BIMCO adopts four ETS clauses

With the EU Emissions Trading System (EU ETS) being extended on January 1st 2024 to cover CO2 emissions from ships of 5,000 gt and above calling at EU ports, regardless of flag, BIMCO’s Documentary Committee has adopted a new Emission Trading Scheme Allowances Clause for BIMCO’s ship management agreement, SHIPMAN, and three ETS clauses for Voyage Charter Parties.

The clauses aim to facilitate collaboration and provide clarity and certainty between parties as the new regulations come into force, which will change the way the industry operates to achieve compliance and cut emissions.

Ships engaged in voyages between two EU ports, and voyages between the EU and a third country, will be covered by the EU ETS.

BIMCO’s new ETS clauses have been developed for use with any applicable emission scheme, including, but not limited to, the EU ETS. This has been done to ensure that the clause can be used with other schemes that may come into force in the future.

The purpose of the ETS clause for SHIPMAN is to allocate costs and responsibilities between owners and managers, thereby facilitating compliance with emission trading schemes. This includes the reporting of emission data, as well as the transfer and surrender of emission allowances for ships operating under an emission scheme.

The clause has been developed for inclusion in the upcoming revision of SHIPMAN (expected to be published during the first half of 2024) and as a freestanding clause for use with SHIPMAN 2009.

BIMCO’s Documentary Committee also adopted three ETS clauses for voyage charter parties which are an ETS – Emission Scheme Freight Clause for Voyage Charter Parties 2023, an ETS – Emission Scheme Surcharge Clause for Voyage Charter Parties 2023 and an ETS – Emission Scheme Transfer of Allowances Clause for Voyage Charter Parties 2023.

Already published carbon clauses from BIMCO include the Emission Trading Scheme Allowances Clause for Time Charter Parties, CII Clause for Voyage Charter Parties, CII Operations Clause for Time Charter Parties and the EEXI Transition Clause for Time Charter Parties.

In addition, a BIMCO subcommittee is currently working on the development of an ETS clause for Contracts of Affreightment.

Meanwhile, International Transport Intermediaries Club (ITIC) said that the cost of the European Union’s (EU) new Emissions Trading Scheme (ETS) to the shipping industry could be in the billions.

ITIC noted that the implementation of EU ETS was creating tensions between shipowners and charterers, particularly surrounding the language within charter agreements to ensure a fair distribution of costs and legal risks.

Robert Hodge, General Manager at ITIC, said that it was vital that ship managers take necessary due diligence to ensure any of these risks are mitigated.

“Ship managers will have an important role in managing the scheme for their owners. It is, therefore, vital that ship management agreements set out the responsibilities and liabilities for doing so. The EU ETS is likely to cost the industry billions in extra fees so ship managers and charterers should assess every aspect of the costs and legal risks associated with the scheme to ensure they are not left in a financial precarious position,” Hodge noted.

Emission schemes are ‘cap and trade’ markets that permit the emission of greenhouse gases in exchange for allowances. Over time, the quantity of allowances available to industry are reduced as an incentive to reduce emissions through increased efficiency and the use of alternative fuels.

ETS Emission Scheme Freight Clause For Voyage Charter Parties:

ETS Emission Scheme Surcharge Clause for Voyage Charter Parties:

ETS Emission Scheme Transfer of Allowances Clause for Voyage Charter Parties:

HFW green shipping and decarbonisation experts Alessio Sbraga and Joseph Malpas formed part of the drafting sub-committee for this suite of voyage charterparty clauses. HFW was the only law firm on the sub-committee.