Shipping

Through the publishing of its latest Merchant Shipping (‘MS’) Notice, namely MS Notice 182, Transport Malta shines the spotlight on the recent amendments made to Regulation (EU) 2015/57 (‘MRV Regulation’), which make reference to the monitoring, reporting and verification of emissions created from shipping activities and also reminds all those concerned of the applicable MS Notices 133, 137 and 140, which speak of the MRV Regulation and THETIS-MRV, which shall be discussed in further detail below. The entry into force of the MRV Regulation was an important step towards the decarbonisation of the maritime transport sector, and on the 10^th of May 2023, the MRV Regulation was amended via Regulation (EU) 2023/957 (the ‘ETS Regulation’) to include references to the EU Emissions Trading System (‘ETS’) and to the monitoring, reporting and verification of additional greenhouse gas emissions and other emissions from various ships.

From an ETS perspective, Directive 2003/87/EC (the ‘ETS Directive’) will cover maritime transport emissions starting from 1^st January 2024 and is considered to be one of the cornerstones of the European Union’s climate policy. This extension of scope onto the maritime industry is aimed to build upon the already-existing monitoring, reporting and verification of emissions currently in place. The core principle here is to remain the same as that which applies to other ETS sectors, where for the maritime industry specifically, shipping companies shall now closely monitor their emissions and either purchase or surrender ETS emission allowances for each ton of greenhouse gas emissions which is reportable under the EU ETS.

As of 1^st January 2024, the scope of the MRV Regulation will be widened to cover methane (CH₄) and nitrous oxide (N₂O) emissions, in addition to the already reportable CO₂ emissions, by means of the THETIS-MRV system, access to which is granted to shipping companies (which are responsible for ship operations), verifiers (legal entities that handle verifications to assess the documents submitted by shipping companies) and States/administering authorities (States under whose laws the vessel is registered or an EU Member State competent authority for EU MRV, ETS and Fuel EU legal frameworks). It is worthy to note that the shipowner may delegate the responsibility of managing a ship to a shipping company, but if this obligation is delegated to an ISM Company, then a mandate is required for this purpose. An ISM Company is one which manages a vessel in compliance with the International Safety Management (ISM) and International Ship and Port Facility (ISPS) Codes.

The role of the administering authority for and on behalf of the State would then be the entity responsible for the administration of the EU ETS in regard of a shipping company as well as approving its Ship Monitoring Plan (‘SMP’). An SMP is meant to contain information concerning the monitoring method(s) for the ship and shall also contain information about the sources of CO₂ emissions on board the ship, along with a description of the procedures and systems used to update the list of CO₂ emission sources over the reportable period as well as a description of the procedures used to ensure the completeness of the list of voyages, emission factors used for each fuel type, fuel consumption, data per voyage and how surrogate data for closing data gaps is determined. Additionally, the administering authority would also be in charge of ensuring that the shipping company is complaint with the overall MRV and ETS obligations whereas the roles of the aforementioned verifiers would include the assessment of the SMP which is submitted by shipping companies via the THETIS-MRV platform, verification of partial and annual emission reports, verification of reports at company level and assessing conformity of ship emission reports along with other tasks.

The THETIS-MRV system was created with the aim of supporting the implementation of the MRV Regulation and facilitating the job of verifiers vis-à-vis the issuance of documents of compliance (which are only issued after the annual ship emission report) and to also provide flag States/administrative authorities with a suitable platform for the consultation of emission reports. Ultimately, the goal of this platform is to act as a centralised hub for all concerned parties to fulfil their obligations in a centralised manner.

Furthermore, as of 1^st January 2025, general cargo ships and offshore ships between 400 and 5,000 gross tons (‘g.t.’) as well as offshore ships of more than 5,000 g.t., will also be covered by the MRV Regulation. From 2025 onwards, by 31^st March of every year, an emissions report for all ships from the year prior shall be submitted to the relevant administering authority, the authorities of the flag States concerned for ships flying the flag of a Member State and to the European Commission, if deemed satisfactory by an accredited verifier. By the same date, for all ships falling within the scope of the ETS Directive, a satisfactory report (at company level) shall be submitted to the relevant administering authority, by means of the THETIS-MRV system.

The report at company level would essentially contain data identifying the company itself and its ships along with the sum of all the ships’ aggregated emissions of greenhouse gas emissions to be reported as per the ETS Directive, the results of which are to be submitted to the EU Registry. For the benefit of clarity and transparency, all reportable emission data shall be made available to the general public.

Ultimately, the goal of the MRV Regulation and the ETS Directive and Regulation, is to enforce the ‘polluter pays’ principle, whilst simultaneously safeguarding the integrity of the global environment for future generations through the mitigation of the harmful effects of the emissions caused by shipping activities by means of the Union-wide rules which shall start to apply from 1^st January 2024.