European Emissions Trading System (EU ETS) Management

The recently released European Union’s Monitoring, Reporting, and Verification (EU MRV) dataset for shipping's CO2 emissions in 2022 reveals noteworthy year-on-year changes despite an overall modest reduction in the industry's emissions. The EU MRV regulation mandates ships over 5,000 gross tons to report CO2 emissions to and from EU and EEA ports, serving as the basis for the industry's integration into the EU Emissions Trading System (ETS) starting January 1, 2024.

How can we help you in the EU Emissions Trading System (ETS) in 2024?

Embark on a path of effortless compliance and strategic management with our tailored suite of services designed for the dynamic environment of the European Union Emissions Trading System (EU ETS). At the forefront of sustainable solutions, we offer a spectrum of services designed to meet your expectations. From data handling to strategic commercial guidance, our commitment is to navigate the complexities of EU ETS with precision. Explore the core pillars of our offerings below:

Data Handling and Verification
We enable 3rd party verification services for emissions data to help avoid disputes between owners and charterers. This data is then securely provided to a private Hecla-powered Emissions Management digital platform that is bespoke for customers.

Registry Account Management
We ensure reliable and legally compliant registry account management and facilitate all account activities to guarantee transfer transactions.

Procurement of Allowances
We provide continuous support in accessing the complex and volatile compliance markets for buying and selling EUAs.

Annual Surrendering
We safeguard the annual surrendering process to match verified MRV emissions with registry holdings to avoid the risk of legal ramifications and fines.

Commercial Advice
We provide bespoke, commercial advice to integrate the complexities of the EU ETS into your business model and successfully manage compliance obligations

Hecla Emissions Management AS is a joint venture between Wilhelmsen Ship Management, part of the Wilh. Wilhelmsen Group, and shipbroker Affinity Shipping LLP. The Company has been established as a neutral and independent provider of compliance services relating to the European Union Emissions Trading System (EU ETS).

Hecla centralises the ETS value chain within one workflow and allows customer oversight through its digital platform.


For in-depth information about Hecla's services, navigate to their website at https://www.hecla-em.com/

General FAQs Regarding EU Emissions Trading Systems (EU ETS)

What is the EU Emissions Trading Scheme legislation?
The Emissions Trading Scheme is a complex set of legislation created by the European Commission to tackle climate change by reducing greenhouse gas emissions from heavy industries and power plants, and, from January 1, 2024, it applies to shipping. The EU ETS is operating through a "cap and trade" system: a cap is set on the total amount of emissions allowed, and allowances are then issued and traded within that cap. Companies must hold enough allowances to cover their emissions, meaning those emitting more need to either buy allowances from others or reduce their emissions.

What are the benefits of outsourcing shipping ETS management to a ship management company?
Outsourcing EU ETS management to a ship management company can offer several key benefits

• Expertise: Ship management companies have specialized teams with in-depth knowledge of EU ETS regulations and best practices. This expertise can ensure accurate compliance and potentially reduce costs.
• Streamlined Processes and Reduced Risk: Ship management companies have established systems and procedures for managing EU ETS compliance, reducing the risk of errors and non-compliance penalties.
• Efficiency and Cost Savings: Outsourcing can free up internal resources to focus on core business operations. Ship management companies can often achieve economies of scale, potentially leading to cost savings.

What is the Hecla-powered Emissions Management digital platform implemented in EU ETS Management?
The Hecla-powered Emissions Management digital platform is a bespoke software solution developed by Hecla Emissions Management, a company specializing in assisting shipowners and charterers with EU Emissions Trading System (EU ETS) compliance. The following is part of its information:

• Purpose: It manages all aspects of EU ETS compliance for shipping companies, including data collection, verification, reporting, and allowance trading.
• Customization: It's described as "bespoke for customers," suggesting it can be tailored to the specific needs and requirements of each client.
• Security: Data is securely stored and transferred on a private platform.
• Features: While specific features haven't been publicly disclosed, it likely includes tools for:
• Emissions monitoring and calculation
• Compliance reporting generation
• EUA allowance management and trading
• Real-time data visualization and analytics
• Communication and collaboration with relevant stakeholders

How does the EU Emissions Trading Scheme work?
According to Wikipedia, the EU Emissions Trading Scheme (ETS) revolves around the "cap and trade" principle. Imagine a pie representing the total allowable greenhouse gas (GHG) emissions for covered industries. The EU slices this pie into smaller pieces called "allowances," each representing a ton of CO 2 eq (carbon dioxide equivalent).

Here's how it works:

1. The Cap: Every year, the EU sets a strict cap on the total number of allowances available. This cap gradually shrinks, forcing overall emissions down over time.
2. Allocation: These allowances are allocated to covered entities like power plants, factories, and airlines. Some receive them for free, while others need to purchase them through auctions.
3. Trading: The magic lies in the "trade" part. Companies can buy and sell allowances amongst themselves on the EU carbon market. Those with low emissions may have spare allowances they can sell, while those exceeding their share can buy to avoid hefty fines.
4. Compliance: At the end of each year, each covered entity must surrender enough allowances to cover their verified emissions. If they fall short, they face significant fines.

Who is covered by the EU ETS regulation?
The EU Emissions Trading System (ETS) regulation casts its net over a wide range of entities responsible for significant emissions of greenhouse gases, expanding the scope over time. Right now, the major players covered by the ETS include:

• Stationary installations: This encompasses the energy sector, covering power plants, refineries, and other fuel-intensive industries. They account for the bulk of the emissions under the ETS.
• Manufacturing industries: Energy-intensive sectors like cement, steel, chemicals, and paper production are also included, targeting their industrial processes' emissions.
• Aviation: Since 2012, aircraft operators flying within the EU member states and some departing flights have been covered, tackling emissions from this rapidly growing sector.
• Maritime transport: As of January 1, 2024, the ETS will start covering emissions from large ships on intra-EU voyages and 50% of emissions with non-EU legs.

Source: https://en.wikipedia.org

What is the EU ETS allowance?
In the EU Emission Trading System (ETS), an allowance is like the emission permits for one ton of CO2. According to the European Commission, the EU allowances are eventually placed in the Market Stability Reserve. Each covered company is allocated or required to purchase these emission allowances, and they must surrender enough allowances at the end of the year to cover their actual emissions. If they pollute more than their quota, they face hefty fines. This limited number of emissions allowances dwindles over time, forcing companies to use renewable energy to reduce emissions to stay within the cap and avoid costly penalties.

What is the penalty for ETS in the EU?
In the EU ETS adopted by the European Parliament, the main penalty for non-compliance is the excess emissions penalty, which is a hefty fine of €100 per ton of CO2 emitted without a corresponding allowance. This creates a strong financial incentive to exceed the cap and ensures the system's effectiveness. If companies fail to hand over sufficient allowances by the deadline, fines are automatically applied and will increase yearly with inflation to maintain their leverage. Non-compliance could also result in exclusion from future auctions, suspension of trading and, in the case of shipping lines, even a ban from trading within the EU countries.

Source: https://climate.ec.europa.eu