From 1 January 2018 large ships must monitor and report CO2 emissions

As of 1 January 2018, subject to a few exclusions, ships over 5000 gross tonnage (“Relevant Ships”) became subject to monitoring and reporting requirements on carbon dioxide emissions (CO₂), fuel consumption and cargo carried within all ports under the jurisdiction of a Member State and for any voyages to or from a port under the jurisdiction of a Member State. The new monitoring and reporting requirements for ships were established by the EU Regulation on monitoring, reporting and verification of carbon dioxide emissions from maritime transport (Regulation (EU) No. 757/2015 as amended) ( the “EU Regulation”) which came into force in April 2015.

Background

It is estimated that Relevant Ships account for 55% of all ships calling into EU ports and 90% of related emissions. The monitoring and verification requirements are part of a staged process to understand GHG reduction potential prior to possible pricing of those emissions. There has been talk of including them within the EU ETS subject to any proposals for global agreements on the reduction of GHG from international shipping. The EU Regulation is therefore a key European measure designed to understand how to make shipping ‘greener’.

The EU Regulation

The EU Regulation establishes rules for monitoring, reporting and verifying CO₂ emissions from Relevant Ships which make voyages that start or finish in an EU Member State port (for further details on the scope and exemptions see our previous lawnow). The EU Regulation has been designed to be compatible with a global data collection system which is being developed by the IMO (effective from 2018). The duty holders directly affected are defined in the EU Regulation as “Companies” meaning “a shipowner or any other organisation or person, such as the manager or the bareboat charterer, which has assumed responsibility for the operation of the ship from the shipowner”. Importantly, ships are subject to the EU Regulation regardless of their flag. A limited number of categories of ships are excluded, including warships, naval auxiliaries, fish-catching or fish-processing ships, ships not propelled by mechanical means, and government ships used for non-commercial purposes.

Key compliance dates

From 1 January 2018, Companies are required to monitor emissions for each Relevant Ship on a per-voyage and aggregate on an annual basis by applying the appropriate method chosen in their monitoring plan. The monitoring plan indicating the method chosen to monitor and report emissions and energy efficiency related data for each Relevant Ship should have been submitted to independent verifiers by 31 August 2017.

From 2019, by 30 April of each year, Companies will be required to submit to the Commission and to the authorities of the flag States concerned, an independently verified emissions report concerning the emissions and other relevant information (such as distance travelled, time of journey, type of fuel used and cargo carried) during the annual reporting period for each Relevant Ship under their responsibility.

From 2019, by 30 June of each year all Relevant Ships having performed activities in the previous reporting period and visiting EU ports, must carry on board a valid Document of Compliance (“DoC”) issued by an accredited EU Regulation shipping verifier (.i.e. an independently accredited company appointed to assess the veracity of the emissions report). This might be subject to inspections by Member States' authorities.

Implementing Regulations

Importantly, on 4 November 2016 the European Commission published the following pieces of legislation which specify (a) how cargo is to be calculated for different categories of Relevant Ships; and (b) which templates are to be used for monitoring plans, emissions reports and DoCs. Further details are contained in the following:

• Implementing Regulation (EU) 2016/1928 on determination of cargo carried for categories of ship others than passengers ro-ro and container ships pursuant to Regulation (EU) 2015/757
• Implementing Regulation (EU) 2016/1927 setting templates for monitoring plans, emissions reports and DoCs pursuant to Regulation (EU) 2015/757

UK enforcement of the EU Regulation

The EU Regulation is in force and binding but the precise enforcement process is left to Member States. The UK Government has implemented the enforcement process via the Merchant Shipping (Monitoring, Reporting and Verification of Carbon Dioxide Emissions) and the Port State Control (Amendment) Regulations 2017 which entered into force on 1 October 2017 (the “UK Regulations”). The key point to note is that under the UK Regulations a Company could be made criminally liable.

The potential fines should a Relevant Ship:

1. enter or leave a port in the United Kingdom without a valid DoC; and/or
2. fail to keep on board a valid DoC or to present a valid DoC upon inspection,

are unlimited in England and Wales and subject to the then statutory maximum in Scotland and Northern Ireland. For instance the current statutory maximum in Scotland is £10,000.

The UK Regulations also amend the Merchant Shipping (Port State Control Regulations) 2011 to make it a requirement for an inspection under those regulations to include a check that the ship is carrying a DoC. This will apply to inspections carried out on and after 30th June 2019. Any impact on these inspections as a result of the proposed exit by the UK from the EU is unknown at this point.

Importantly, under the UK Regulations there are wide powers of enforcement including the power:

• To detain a Relevant Ship by serving it with a ‘detention notice’ if anyone attempts to navigate it out of a port without a valid DoC; and
• Where a Member State has informed the Secretary of State that it has issued an expulsion order, refuse entry for the particular Relevant Ship to any port in the UK.

The UK Regulations make provision for arbitration in the event that a Company alleges that a Relevant Ship was improperly detained. In the event that an arbitrator finds in favour of the Company following detention of a Relevant Ship, compensation will be payable in respect of any loss suffered in consequence of the detention of the Relevant Ship as the arbitrator thinks fit.

Details of the UK Regulations are available here

Details of the EU Regulation are available here