The European Commission has proposed adding shipping to the EU Emissions Trading System. The proposal sets the shipowner as the responsible entity, copying the arrangement in the Council position of 25 October 2019 on the Monitoring, Reporting and Verification Regulation (MRV) revision. As shipping companies will soon have to pay for their emissions, rather than just report them as under the original MRV, there is a question as to whether the shipowner is the appropriate responsible entity going forward.
Since ships are often leased out under charter contracts, the charterer makes decisions that affect the day-to-day emissions of the ship. This means that a large part of what determines the number of allowances, and so the ETS compliance cost, of a shipowner is in the hands of the charterer.
If the amendments as suggested here are implemented along with the rest of the ETS proposals for international shipping, there will be a closer reflection of the polluter pays principle in EU law. The shipowner will remain the ‘responsible entity’ under the Directive, but the shipowner will be legally assured the right to reclaim the costs incurred under the ETS and have available remedies as required.