HOUSTON, TEXAS (Editors at Energy Analytics Institute, 28.Feb.2025) — Commencing 1 Jan. 2024, the European Union’s Emissions Trading System (EU ETS) was extended to cover carbon dioxide (CO2) emissions from ships over 5,000 gross tons entering EU ports.
The EU ETS covers:
(1) 50% of emissions from voyages either starting in or ending in an EU port, and
(2) 100% of emissions from voyages between 2 EU ports or emissions generated while a ship is within an EU port.
Shipping companies will have to surrender EU ETS emissions allowances (EUA) for each ton of reported CO2 emissions in the scope of the EU ETS, Flex LNG Ltd. revealed on 28 Feb. 2025 in its 2024 annual report.
There is a phase-in period for the regulations, as allowances will have to be submitted for 40% of 2024 emissions, 70% of 2025 emissions and 100% of emissions for 2026 and subsequent years. Beginning in 2026, the scope of the EU ETS will also be expanded to include Methane (CH4) and Nitrous oxide (N2O).
EUAs are valued based upon a market approach utilizing prices published on an EUA market index, according to Flex LNG.
The EUAs are measured at the estimated cost of purchasing the credits from the EUA market, based on the date of completing a voyage. And, for the year ended 31 Dec. 2024, Flex LNG recorded EUAs amounting to $1.4mn under “Vessel operating revenues”, and an equal amount under “Voyage expenses”.
____________________
By Editors at Energy Analytics Institute. © 2025 Energy Analytics Institute (EAI). All Rights Reserved.
