Introduction
The Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026 (SI 2026/392) (the “Order”) marks a significant step in the expansion of the UK Emissions Trading Scheme (“UK ETS”) into new sectors. By bringing domestic maritime transport within scope, it brings the UK toward broader, economy-wide carbon pricing.
For energy and transport stakeholders, the Order represents both a regulatory shift and a signal of future direction – particularly as the UK continues to converge, at least in part, with international approaches to maritime emissions.
What is the UK ETS?
The UK ETS is the UK’s principal carbon pricing mechanism, established in 2021 following its departure from the EU Emissions Trading System. It operates on a “cap and trade” basis: the government sets a limit on total greenhouse gas emissions from covered sectors, and regulated entities must acquire and surrender emissions allowances corresponding to their output. Over time, the cap is reduced, creating a financial incentive to cut emissions and invest in lower-carbon technologies.
Extending the UK ETS to Maritime
From 1st July 2026, the UK ETS will apply to certain domestic maritime activities, primarily targeting larger vessels (5,000 gross tonnage and above) and covering key greenhouse gases including carbon dioxide, methane, and nitrous oxide.
Maritime operators will be required to submit an emissions monitoring plan to the regulator documenting how they will:
- monitor and report emissions under established monitoring, reporting and verification frameworks;
- verify emissions annually; and
- surrender allowances equivalent to emissions produced (noting that an amended requirement exists in relation to UK-NI voyages).
This introduces a direct carbon cost into maritime operations, aligning shipping more closely with other regulated sectors including energy-intensive industries, electricity generation, and aviation.
Key Considerations and Impacts
Allocation of Responsibility
The maritime sector is characterised by complex operational structures with ownership, technical management, and commercial control often divided between different entities. This raises important legal questions as to who bears responsibility for compliance under the UK ETS.
The Order uses the term “maritime operator” and the explanatory memorandum refers to “operators of ships undertaking eligible maritime activities”. This may or may not be the vessel’s owner, depending on the circumstances and the contractual structure which is in place in respect of the relevant vessel. A fuller description of which party / parties this applies to is set out in the Order.
Under the Order, the maritime operator bears primary responsibility for monitoring, reporting and surrendering allowances, while (depending on the contractual structures which are in place) owners and charterers will or may retain operational and/or contractual duties. Absent clear statutory allocation in all scenarios, contractual arrangements will play a critical role in determining how obligations and associated risks are distributed between parties.
Enforcement and Liability
The UK ETS is supported by a robust enforcement framework, including financial penalties for non-compliance. For maritime operators, this introduces a new category of regulatory risk. A failure at any stage for maritime operators – whether through non-reporting, misreporting, or under-surrender – will constitute a breach of statutory obligations which will now need to be considered as part of daily operations.
Cross-Border Considerations
The UK’s approach broadly mirrors developments in the EU, increasing the likelihood of overlapping compliance obligations for maritime operators active across jurisdictions. Any divergence between regimes may add complexity over time and raise double counting issues on international routes.
Commercial Impact
Commercially, the introduction of carbon pricing may lead to the reallocation of costs associated with the UK ETS through contracts, including in charterparties and freight agreements. Such reallocation may materialise through the development of carbon clauses and cost pass-through mechanisms, as well as leading to increased focus on carbon exposure in transactional due diligence.
Conclusion
The Order represents a further step in embedding carbon pricing across the UK economy and highlights the continued expansion of emissions regulation into new sectors.
As maritime operators navigate this shift, they will need to address complex issues around the allocation of responsibilities, enforcement risks, and the cross-border implications of carbon pricing. Ultimately, this extension of the UK ETS serves as both a critical mechanism for achieving the UK’s carbon reduction goals and a reminder of the increasing role carbon pricing will play in shaping the future of global transport.
