BIMCO approves emission allowances clause for time charter parties

The Emission Trading System Allowances (ETSA) clause assigns costs and responsibilities for greenhouse gas emission allowances in charter parties.

PHOTO: BIMCO’s Documentary Committee approved the ETSA clause during a meeting in London earlier in May. BIMCO

"The basic premise of the clause is that the party providing and paying for the actual amount of fuel used is the party that is responsible for providing and paying for emissions allowances," BIMCO said in a statement.

Shipowners should monitor emissions from vessels and then provide data to charterers for calculation. Charterers will then review the data and transfer allowances back to shipowners on a monthly basis.

Charterers will have to either register with an account in the EU's registry system or obtain allowances through brokers or banks.

Shipowners have the right to suspend performance if charterers fail to transfer allowances when they are due, says BIMCO.

BIMCO says this clause is not only limited to the EU Emissions Trading System (EU ETS), but will apply more broadly as other countries or regions outside of the EU could introduce emissions trading systems of their own in the future.

Last week, Members of the European Parliament (MEPs) voted in favour of revising the EU ETS with more far-reaching mandates for shipping.

The revision sets out to cover all emissions from intra-EU voyages. Half of emissions from voyages to and from EU countries would be included between 2024-2026, before this would be expanded to 100% from 2027.

A revised EU ETS with shipping included could be implemented by end of this year. But it will first be up for a vote at the upcoming plenary session of the European Parliament, scheduled on 6-9 June, and if passed it would have to be negotiated with EU members states.