I Introduction

On 1 January 2024 shipping became subject to the Emissions Trading Scheme (ETS) of the EU pursuant to the amended Emissions Trading Scheme Directive 2023/957. Ships trading to, from, and within the EU will have to surrender allowances in respect of CO₂ emissions on these voyages by 30 September of the year following the year in which the emissions occurred. The obligation of surrendering allowances is being phased in over the years 2024 and 2025, and for voyages starting or ending outside the EU there will be a 50% discount on the amount of allowances to be surrendered. The first allowances for calendar year 2024 will need to be surrendered by 30 September 2025, and the party responsible will be the “shipping company” which could be the registered owner, or the bareboat charterer or the ship manager. The surrender of allowances may also affect time charterers as the 2023 ETS Directive provides for a “pass-through” under which Member States are to provide the “shipping company” with a statutory right of reimbursement for the cost of all surrendered allowances from the party contractually responsible for the operation of the vessel, and for the provision of its fuel – the bareboat charter or the time charterer. Given that under most time charters the owner will be the party responsible for acquiring and surrendering allowances, the “pass-through” opens up the prospect of a new “torpedo” in the near future. This chapter will examine the impact of the revised ETS Directive 2023 on parties connected with vessels trading to, from, and within the EU and on possible responses available to time charterers in the English High Court if faced with “pass-through” claims against them by the “shipping company” which are directly opposed to the contractual position under the time charter as regards responsibility for acquiring and surrendering allowances.