Europe’s shipping industry will face its first financial bill under the European Union’s Emissions Trading System (EU ETS) on September 30, marking a watershed moment in efforts to curb greenhouse gas emissions from maritime transport.

According to Drewry, the London-based maritime consultancy, around 13,000 ships submitted verified emissions data for 2024 through the EU’s Monitoring, Reporting and Verification (MRV) platform.

The records show that vessels emitted 90 million tonnes of CO2 last year, up 14 per cent on 2023, largely due to rerouting around the Cape of Good Hope after attacks in the Red Sea forced operators to avoid the Suez Canal.

Under the phased scheme, ship operators calling at EU ports are required to surrender allowances covering 40 per cent of those emissions this year.

With EU Allowances (EUAs) trading at about €70, Drewry estimates the bill will reach roughly $2.9 billion this autumn.

The containership sector is particularly exposed. Although it accounts for just 16 per cent of the fleet and 21 per cent of tonnage, it was responsible for 34 per cent of reported emissions.

On average, each container vessel will face annual compliance costs of about $500,000, while RoPax and passenger ships may pay close to $1 million.

Moreover, the burden is set to rise sharply in the coming years. Companies will need to cover 70 per cent of emissions reported for 2025, before the system reaches full scope in 2027. Drewry forecasts the annual cost for the industry could reach $7.5 billion.

Faced with these mounting costs, operators are already accelerating investment in energy-saving technologies, sustainable biofuels, alternative-fuel vessels and advanced low-friction coatings.

Failure to comply, meanwhile, carries a penalty of €100 per tonne of CO2, in addition to the obligation to purchase missing allowances.

The EU scheme applies to voyages between EU ports, half of the emissions from international voyages to or from the bloc, and all emissions during calls at European ports.

At the same time, the International Maritime Organisation (IMO) has agreed a Net Zero Framework (NZF), reached in April and due for final adoption in October 2025.

The system would represent the first global carbon pricing mechanism for a single industry, also based on the “polluter pays” principle.

Crucially, it would allow compliance costs to be passed to the commercial operator that controls fuel, cargo and routing, spreading the burden more evenly across the transport chain.

The EU has said it intends to align its rules with the IMO framework once it is in force to avoid overlapping levies.

Cyprus prepares for compliance

As one of Europe’s top shipping hubs, Cyprus will be directly affected by the EU ETS. The island hosts the third-largest merchant fleet in the EU by tonnage and a global ship-management cluster based in Limassol.

To this end, authorities have already published the list of administering authorities under the ETS to guide ship operators on compliance, while the Cyprus Shipping Chamber (CSC) has been briefings for members on the financial and operational implications.

According to the chamber, Cyprus also retains a competitive edge through its EU-approved Shipping Taxation System, introduced in 2010.

At its core is the tonnage tax regime, which extends favourable treatment not only to owners of Cyprus-flag vessels but also to owners of foreign-flag ships and charterers.

The system covers shipowning, shipmanagement and chartering activities, and, uniquely within the EU, it also applies to profits from vessel sales, dividends and interest from shipping activities.

This has made Cyprus the only ‘EU-approved open registry’, offering ship operators the ability to combine competitive taxation with the credibility of an EU flag.

Furthermore, the chamber stresses that shipping contributes around 7 per cent of Cyprus’ GDP, according to Central Bank data.

The sector generates roughly €10 million annually in fees and taxes, while providing employment for about 4,500 people onshore and some 55,000 seafarers serving on vessels controlled or managed from Cyprus.