News / Not all shipowners able to trade EUAs, despite EU ETS already in effect

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The EU ETS won’t be smooth sailing for shipowners facing waves of extra administration.  

Despite the EU’s new emission regulation coming into effect this month, Friederike Hesse, MD of ETS management platform Zero44, said “most companies are not yet prepared”, and there was a series of complex issues yet to be ironed out.  

The EU ETS came into effect on 1 January, requiring owners to pay for EU allowances (EUAs) that correspond with the carbon emissions of their ships calling at EU ports. The market-based price of EUAs remains highly volatile, as they correspond with the bidding nature of purchase. 

Shipowners trading under the EU ETS are required to open a Maritime Operator Holding Account (MOHA) to transfer and surrender allowances. The number of MOHAs needed varies depending on a fleet owner’s legal structure, as shown in the infrographic below (click to expand).

Source: Hecla Emissions Management

“It is a nightmare to open them [MOHAs], but you only have to do it once and it will make it easier to manage,” said co-MD of maritime emissions data platform OceanScore Albrecht Grell. 

He advised carriers that the high intra-day volatility of EUA prices created a risk, if buying EUAs for others based on pre-agreed prices in cash. He advised stakeholders to trade in EUAs rather than cash, where possible. 

“It’s significant, so if someone provides you with cash you could lose out by hitting the wrong button at the wrong time,” said Mr Grell. But he added that there was no regulation on EUA traders settling with MOHA holders.

“Anyone is free to mark up as acceptable in the market,” but he advised: “Don’t try and play the market; trade as needed operationally.” 

Ms Hesse added: “Set up your Union Registry Trading Account (URTA) to make sure you are able to send and receive EU allowances.” 

The URTA serves to guarantee accurate accounting for all allowances issued under the EU ETS. It keeps track of the ownership of allowances held in electronic accounts – in the same way a bank records its customers and their funds. 

Director of Hecla Emissions Management Øyvind Stordal noted that not having this account set up was “a common issue”, but that shipping companies were able to use a custody solution with a service provider that can hold EUAs until a trading account is opened.  

Another layer of stress for shipowners is the issue of data quality – knowing that the emissions data being received is accurate. Ms Hesse explained that data verification was a compulsory step for the surrendering party and required annually.  

“Data quality is going to be key,” added Mr Stordal. “Verified and validated emissions data will be required in many cases… at the end of the day, that’s what you’re settling EUAs with.” 

The price of verification will, however, come at a cost, with Mr Grell pointing out that “prices differ significantly by provider”.  

While many complexities remain as the shipping industry gets to grips with thes new regulation, Mr Grell, Ms Hesse and Mr Stordal concluded that after the heavy upfront administration work is completed, and accounts are open, “in a few months, players will settle into their own way of doing things”.