Fair Play in Adapting to EU ETS

Starting January 1, 2024, the shipping industry was integrated into the European Union's Emissions Trading System (EU ETS). Until the very end, there was – and still is – plenty of room for how to interpret the new legislation. However, SOL made an early commitment to minimize the risks of creating winners and losers within the system.

As we are now four months into the new year, the EU ETS has become a reality for the maritime sector. SOL welcomes these initial steps towards a more sustainable industry and has put considerable effort into proactively preparing for this change, establishing an effective process for managing emission rights together with customers and partners.

“Strong relationships with our partners and clients have always been a key to success for us. It´s our conviction that cooperation will become even more crucial as we move towards a greener industry. The EU ETS is the first of many upcoming regulations that will challenge companies in our sector,” says Nathalie Munteanu, Chief Financial Officer, SOL.

The biggest question regarding the new legislation has been how to define responsibilities between parties and how to act accordingly. EU ETS states that the registered owner of a ship is responsible for surrendering allowances to authorities. However, the responsibility can also be transferred to the DOC holder (technical management), who also reports MRV data. For SOL, which operates ships on bareboat, time- and voyage charter, it has been a challenge that different parties, including European authorities, have made various interpretations of the new legislation.

“Preparing the contractual components has required a lot of work due to the room for interpretation in the framework. Apart from creating contracts where SOL complies with the new regulation, we also want to ensure that our counterparts are satisfied with the commitments made. We followed the developments in guidelines from accredited ship associations and gathered knowledge. Through workshops with our project team, we developed and discussed proposals with our tonnage providers. Dialogue was the key to getting processes in place on time,” says Nathalie Munteanu.

The implementation of the EU ETS affects many departments and functions within a company. At SOL, new operational strategies in sales, operations, and finance have been implemented. Along with establishing frameworks with customers and suppliers, considerable effort has been invested in creating and refining internal workflows.

“We are a dynamic team with a wide range of skills and backgrounds. We encourage our employees to bring their ideas to the table. Preparing for the EU ETS required all of that and was a good test of our capacity and our core values,” says Nathalie Munteanu.

Despite being in effect for closer to four months now, shipping companies and authorities still show variability in adapting to the emissions rights system. As with all new rules and regulations, it takes time for a common practice to be established.

“We will evaluate and, if necessary, revise our process along the way, maintaining 
frequent dialogues with our customers and partners to secure a fair game,” says Nathalie Munteanu.

For more info, please contact:
Nathalie Munteanu, CFO
Nathalie.munteanu@swedishorientline.se

Photo: Anna-Lena Lundqvist

What is EU ETS?
The EU ETS is an emissions cap-and-trade system designed to reduce greenhouse gases. As of 1 January 2024, ships over 5,000 GT operating within the EU and transporting cargo and passengers for commercial purposes are included. Offshore ships exceeding 5,000 GT will be included starting from 2027. The scope is set to expand over a three-year period, covering 40 percent of emissions in 2024, 70 percent in 2025, and 100 percent in 2026. Initially, the EU ETS will target carbon dioxide emissions and will be extended to include methane and nitrous oxide from 2026.