How Real-Time Emissions Monitoring Prepares Shipowners for EU ETS Deadline

 

The expansion of the European Union Emissions Trading System (EU ETS) to include the maritime industry has introduced significant financial and operational hurdles for all shipowners who are voyaging to or through EU ports. Shipowners must now purchase European Union Allowances regardless of the ship’s nationality.

European Union Allowances are market-driven instruments and must be purchased through one of the regulated carbon exchanges. The prices of the allowances fluctuate like other types of securities and have been highly volatile since its inception. Market analysts predict that the prices will increase dramatically over the next five years.

The first deadline for complying with this new obligation is September 2025, which means shipping companies have just 6 more months to calculate and purchase the required allowances to cover their 2024 emissions in order to comply and avoid penalties.

This article features insights and trends from Frederic Bouthillier, who is the Head of Shipping at Vertis Environmental Finance (STX), one of the largest ETS traders and market makers. 

Bouthillier speaks to the importance of having a structured approach to allowance purchasing, exploring alternative fuels, and implementing technological solutions like Cyanergy’s real time emissions monitoring system — which will help ensure compliance while maintaining a competitive edge in an increasingly regulated market.

Impact of EU Emissions Trading System on Shipowners: Rising and Fluctuating Prices

The EU ETS is designed to drive carbon prices higher over time, making compliance an increasing financial burden for shipowners. "In 2-3 years from now, the price could be above €100," Bouthillier warns. "The structural pricing mechanism is organized in a way that the price will keep rising."

In addition, price fluctuations add complexity to cost management. The European Union Allowances price gained 15% in January before retracing downward in February. These fluctuations make cost forecasting a challenge for shipowners and force companies to adapt quickly to avoid excessive financial exposure.

Companies that underreport emissions risk fines of €100 per missing metric ton, plus the obligation to purchase the shortfall allowances at market rates. Additionally, non-compliance can lead to regulatory investigations, public disclosure of violations, and even suspension from the ETS.

Accuracy Is Critical: The Role of Technology

Accurate emissions reporting is essential for shipowners to comply with the EU ETS and manage costs effectively. Since allowances must be verified by independent auditors, errors in reporting—whether under or overestimating emissions—can have costly consequences.

The need for precise emissions monitoring goes beyond CO2, as other greenhouse gases like N2O and CH4 have significantly higher emissions factors. "That’s why it’s so important to ensure your emissions are monitored by volume and type in a very accurate way," Bouthillier stresses. "If you're short, it might cost you a lot of money. The first element is to have a system on board that allows you to monitor your emissions by volume and type."

Cyanergy's CE² Monitor, which collects engine and gas data every minute, enabling more accurate measuring and reporting. Courtesy of Cyanergy. 

A Strong Incentive to Seek Competitive Solutions

With rising costs and regulatory risks, shipowners must seek ways to optimize their emissions strategy. Companies that fail to adapt risk falling behind competitors who are proactively managing compliance.

"If you don’t move, you will fall behind because the competition might be moving, and you will put yourself out of the game," warns Bouthillier.

Shipping companies that leverage technology to monitor emissions in real time can gain a competitive edge by making informed decisions about when to purchase ETS allowances and how to optimize their fuel consumption.

The Importance of Real-Time Emissions Monitoring

In this volatile market, proactive emissions management is critical. "Under these circumstances, what is of paramount importance is to be proactive,” Bouthillier explains. “By getting a system like Cyanergy on board, looking at the market, optimizing— you’re going to mitigate the damage compared to someone who is waiting until the last minute. All the tools are there."

Real-time emissions monitoring solutions, such as those offered by Cyanergy, provide shipowners with the accuracy and insight needed to navigate the complexities of the EU ETS. For shipowners looking to secure their compliance strategy and minimize costs, investing in advanced emissions monitoring technology is no longer optional—it’s a necessity.

Navigating EU ETS with Smart Solutions

Real-time emissions monitoring systems empower shipping companies with accurate data to optimize allowance purchasing, avoid penalties, and stay ahead of rising carbon costs. By investing in advanced monitoring solutions and proactive compliance strategies, shipowners can not only mitigate financial risks but also strengthen their position in an increasingly regulated industry.

This article is sponsored by Cyanergy, providing cutting-edge solutions for emissions monitoring and compliance. Learn more about their innovative technology here.