GRM is gearing up in preparation for EU ETS
From January 2024, the EU Emissions Trading System (EU ETS) expanded to include emissions generated by the maritime industry. First established in 2005, the EU ETS has for many years applied to heavy industries, e.g. steel, cement, and aviation. The maritime industry will now need to get to grips with the details of the EU’s cap-and trade system to ensure compliance. In short, EU ETS is based on setting a cap on how much greenhouse gases can be emitted. The companies within the system need to surrender EU Allowances (EUAs) for every tonne of carbon they emit. The EUAs can be bought – and sold – in various trading venues.
Shipowners will, therefore, need to rethink their fuel hedging strategies in light of the developing requirements. Fuel hedging, the approach to buying fuel ahead of time when prices are perceived as advantageous, must now factor in the cost of carbon allowances. If maritime companies exceed their emissions allowances, they must buy additional certificates, which is costly. This economic pressure encourages companies to adopt cleaner technologies and fuels to reduce their emissions and consequently, their need for EUA certificates. Likewise, asthe cost of EUA certificates rises, using high-emission fuels like heavy fuel oil becomes more expensive. This cost increase makes alternative fuels (such as biofuels, hydrogen, and ammonia) more competitive. The higher the price of emitting carbon, the more financially attractive it becomes to invest in and convert to alternative fuels with lower emissions.
Implementing the EU ETS will be complex and costly to ship merchants and will require knowledge to adapt to the new regulation. And the need for veteran experts to guide clients through the increasing regulation will continue to grow. The imposition of EU ETS within the maritime industry represents a significant pivot towards emissions trading, an area where GRM has leveraged its prior experience from aviation industry regulations. GRM can help their clients trade the EUA certificates to cover their risks and create tailor-made risk management solutions to match the clients’s exposure in the best possible way.
“Increased expertise becomes necessary among our clients. We help our clients understand the regulatory requirements of EU ETS, as well as assist them estimate the number of EUAs they need and lay down the cost composition of EUAs and different types of fuels. At the beginning of this new regulation, we offer to store the EUAs on behalf of the clients (a maximum of 90 days) until the customer is fully established and onboarded in the EU register. As GRM is listed on the trusted account lists in EU registers, we can deliver EUA certificates within 24 hours”, says Martin Vorgod, Chief Commercial Officer.
