UK Shipping Raises Concerns Over Maritime ETS Expansion

The UK shipping sector has intensified its opposition to government proposals to extend the UK Emissions Trading Scheme (UK ETS) to domestic maritime activity from July 1, 2026. Industry groups warn the move could increase operating costs, place pressure on island communities, and weaken competitiveness, while delivering limited emissions reductions.

The Draft Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026 was approved by the House of Commons on February 11, following what industry bodies described as minimal parliamentary examination.

From July 2026, ships of 5,000 gross tonnes and above operating on domestic routes between UK ports will be required to monitor, report, and surrender allowances covering 100% of their carbon dioxide, methane, and nitrous oxide emissions, including emissions produced while in port. Offshore vessels are scheduled to fall under the scheme from 2027.

The UK Chamber of Shipping said it supports the UK’s climate objectives but raised concerns about both the timing and the design of the policy.

Industry representatives point out that alternative marine fuels currently cost four to five times more than conventional fuels, while most UK ports lack sufficient shore power facilities and grid capacity to support low-emission operations. Without directing ETS revenues back into maritime decarbonisation, they argue the scheme risks becoming a financial burden rather than a mechanism to support transition.

Ferry-reliant and island communities are a particular concern, as operators serving these routes may have little capacity to absorb extra costs. Although some Scottish island services are protected under the EU ETS, similar safeguards have not yet been confirmed within the UK system.

Under the proposed framework, the first reporting period will cover 1 July to 31 December 2026, with verified emissions reports due by 31 March 2027. A one-time “double surrender” provision will allow operators to submit allowances for both 2026 and 2027 together by 30 April 2028.

Compliance responsibility will rest with the vessel’s registered owner, unless formally transferred to another entity responsible under the ISM Code, such as a bareboat charterer or ship manager. Operators that fail to surrender sufficient allowances will face a penalty of £100 per tonne of CO₂ equivalent, adjusted for inflation, in addition to having to cover the shortfall.

The Chamber has called for shipping-related ETS revenues to be ringfenced for investments in shore power, grid improvements, vessel retrofits, and clean fuel development. It has also urged closer alignment with the EU ETS to prevent double charging and carbon leakage, along with a phased introduction or “monitor-only” period to give operators and ports more time to prepare.

With the regulations published in mid-January and set to take effect just six months later, shipowners say they are facing a tight timeframe to complete monitoring plans, appoint verifiers, and update reporting systems.

The UK ETS, launched in 2021 following Brexit, shares many features with the EU system and operates on a cap-and-trade basis. The government has already confirmed the scheme will continue into a second phase from 2031 to 2040.

Industry leaders say they remain willing to work with government, but are calling for what they describe as a practical pathway that reduces emissions without undermining vital UK maritime connectivity.