Insights

As of 1^st January 2024, the European Union (“EU”), welcomed the updated EU Emission Trading System (the “EU ETS”) rules which were duly extended to cater for the maritime sector by means of Directive (EU) 2023/959 of the European Parliament and of the Council of 10th May 2023 amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union and Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading system (the “EU ETS Directive”). By means of the EU ETS Directive, EU ETS will be extended to cover CO₂ emissions from all cargo and passenger ships (i.e. those of 5000 gross tonnage and above) which enter EU ports, regardless of the flag that they fly.

Hand in hand with the EU ETS Directive is Regulation (EU) 2015/757 of the European Parliament and of the Council of 29th April 2015 on the monitoring, reporting and verification of carbon dioxide emissions from maritime transport, amending Directive 2009/19/EC (the “MRV Regulation”). Whereas the EU ETS Directive provides guidelines on the more general aspects of EU ETS, the MRV Regulation, as its name dictates, focuses more on the monitoring, reporting and verification of emissions released whilst carrying out maritime trading.

From a local perspective, Malta is doing its utmost to keep up with the highly technical and complex subject of EU ETS, which is new to both veterans and newcomers of maritime law. By virtue of legal notice (“L.N.”) 73 of 2024, Malta published the Merchant Shipping (Monitoring, Reporting and Verification of Carbon Dioxide Emissions from Maritime Transport) (Amendment) Regulations, 2024, wherein it showcases its effort to be in line with EU standards by amending Subsidiary Legislation (“S.L.”) 234.54, namely the Merchant Shipping (Monitoring, Reporting and Verification of Carbon Dioxide Emissions from Maritime Transport) Regulations.

The main scope of these regulations is to amend the system of penalties for failure to comply with the monitoring and reporting obligations set out in the MRV Regulation. The amending regulations establish the date of applicability of S.L. 234.54 to be 1^st January 2024 and also slightly tweak the scope of applicability to now include:

“Maltese ships of five thousand (5000) gross tonnage and above in respect of the greenhouse gas emissions released during their voyages for transporting for commercial purposes cargo or passengers from such ships’ last port of call to a port of call under the jurisdiction of an EU Member State and from a port of call under the jurisdiction of an EU Member State to their next port of call, as well as within ports of call under the jurisdiction of an EU Member State”

in replacement to what was previously stated in S.L. 234.54 as follows:

“Maltese ships above five thousand (5000) gross tonnage  in  respect  of  CO₂  emissions  released  during  their voyages from their last port of call to a port of call under the jurisdiction of a European Union Member State and from a port  of  call  under  the  jurisdiction  of  a  European  Union Member State to their next port of call, as well as within ports of call under the jurisdiction of a European Union Member State”.

Similarly to the above, the same amendment to the law is made to “other ships of five thousand (5000) gross tonnage and above”. Given that S.L. 234.54 was published back in 2017, the principal amendment that can immediately be identified is the broadening of the scope from “CO₂ emissions” to “greenhouse gases”, given that as per the 1^st January 2024, the MRV Regulation dictates that CH₄ (methane) and N₂O (nitrous oxide) emissions are also to be monitored, reported and verified. Similarly, the scope of the EU ETS will be widened in 2026 once methane (CH₄) and nitrous oxide (N₂O) emissions are introduced.

The amending regulations also cater for the future effects of the MRV Regulation given that as of 1^st January 2025, S.L. 234.54 will also apply to:

• Maltese general cargo ships below 5000 gross tonnage but not below 400 gross tonnage in respect of the greenhouse gas emissions released during their voyages for transporting cargo for commercial purposes;
• Maltese offshore ships of 400 gross tonnage and above in respect of the greenhouse gas emissions released during their voyages, from their last port of call  to  a  port  of  call  under  the  jurisdiction  of  an  EU Member State and from a port of call under the jurisdiction of an EU Member State to their next port of call, as well as within ports of call under the jurisdiction of an EU Member State;
• Other general cargo ships below 5000 gross tonnage but not below 400 gross tonnage in respect of the greenhouse gas emissions during their voyages for transporting cargo for commercial purposes; and
• Other offshore ships of 400 gross tonnage and above in respect of the greenhouse gas emissions released during their voyages, from their last port of call to a port of call in Malta and from a port of call in Malta to their next port of call, as well as within ports of call in Malta.

As a result of the dynamic nature of EU ETS and MRV, developments up until 2027 are already planned to come into fruition for the natural progression and eventual establishment of these principles. Further updates and changes are naturally to be expected and eventually become enforceable as these concepts present challenges on multiple fronts, all of which are to be tackled by the maritime industry at large, at least on an EU-wide level.