EU ETS Overhaul Would Boost Support for Cleaner Ship Fuels

Aviation Fuel/Sustainable Aviation Fuel (SAF)Business News/Analysis certification European Union (EU)Infrastructure International Marine/Boat Bio and Renewable Fuel/MGO/MDO/SMF Opinions Policy Sustainability

July 23, 2026

Print This Article Share it With Friends

by Jim Kendrick (Biofuels Digest) In Brussels, the European Commission proposed revising the EU Emissions Trading System to provide shipping companies with more direct support for sustainable marine fuels and zero-emission propulsion.

The plan would reserve 110 million allowances from as early as 2028 through 2040. Unlike existing maritime support distributed through the Innovation Fund, allocations would be based on companies’ verified use of eligible fuels or technologies.

The mechanism would cover 55% of the remaining price gap for eligible biogas and advanced biofuels, 90% for renewable fuels of non-biological origin and 80% for low-carbon hydrogen and fuels. It would cover 90% of the additional cost of eligible zero-emission propulsion.

The wider revision would also expand ETS coverage to certain smaller ships and strengthen measures intended to prevent evasive calls at nearby non-EU ports. READ MORE

Related articles

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2003/87/EC and Decision (EU) 2015/1814 as regards driving (competitiveness and cost-effective decarbonisation (European Commission)
Reducing emissions from the shipping sector (European Commission)

Excerpt from European Commission: On 17 July 2026, the European Commission proposed a targeted revision of the EU Emissions Trading System (EU ETS) to strengthen Europe's industrial competitiveness and support the delivery of the EU's 2040 climate target.

The proposal reinforces the EU ETS as a driver of investment, with significant additional support for industrial decarbonisation through a new Industrial Decarbonisation Bank, an Investment Booster and continued funding under the Innovation Fund and the Modernisation Fund.

It also modernises the carbon market, strengthens incentives for companies to invest in decarbonisation in Europe, updates the rules on free allocation and the Carbon Border Adjustment Mechanism (CBAM), strengthens the existing ETS for aviation and maritime transport, and gradually extends emissions trading to municipal waste incineration.

This page will be updated shortly with detailed information on the proposed reforms.

Relevant links:

Press release

Regulation proposal - Monitoring, Reporting and Verification (MRV) of maritime emissions

Annex to the Regulation proposal

Impact assessment on the ETS Directive (including ETS maritime)

Executive summary of the impact assessment

While maritime transport plays an essential role in the EU economy and is one of the most energy-efficient modes of transport, it is also a large and growing source of greenhouse gas emissions. In 2018, global shipping emissions represented 1 076 million tonnes of CO2, and were responsible for around 2.9% of global emissions caused by human activities.

Projections show that these emissions could increase by up to 130% of 2008 emissions by 2050. If the climate change impact of shipping activities grows as projected, it will undermine the objectives of the Paris Agreement: a global framework to avoid dangerous climate change by limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C.

At EU level, maritime transport represents 3 to 4% of the EU’s total CO2 emissions, or over 124 million tonnes of CO2 in 2021.

In order to significantly reduce greenhouse gas (GHG) emissions from international shipping, effective global measures are desirable. In July 2023 the International Maritime Organisation (IMO) made a step on this path committing to new targets for GHG emissions reductions and to develop and adopt in 2025 a basket of measure(s), delivering on these reduction targets. The next years to come will show which measures will be adopted and become applicable and whether they will commensurate with achieving these targets and the objectives of the Paris Agreement. The EU action to make sure maritime transport plays its part in achieving climate neutrality in Europe by 2050 is an essential step in incentivising the necessary reductions.

EU action

Inclusion of maritime emissions in the EU Emissions Trading System (ETS)

Since January 2024, the EU's Emissions Trading System (EU ETS) has been extended to cover CO2 emissions from all large ships (of 5 000 gross tonnage and above) entering EU ports, regardless of the flag they fly.

The system covers:

50% of emissions from voyages starting or ending outside of the EU (allowing the third country to decide on appropriate action for the remaining share of emissions);
100% of emissions that occur between two EU ports and when ships are within EU ports.

The EU ETS covers CO2 (carbon dioxide), CH4 (methane) and N2O (nitrous oxide) emissions, but the two latter only as from 2026.

Emissions from maritime transport are included in the overall ETS cap, which defines the maximum amount of greenhouse gases that can be emitted under the system. The cap is reduced over time to ensure that all ETS sectors contribute to the EU’s climate objectives. This will incentivise energy efficiency, low-carbon solutions, and reductions of the price difference between alternative fuels and traditional maritime fuels.

The system builds on the provisions in place for other EU ETS sectors, as well as the recently revised EU Monitoring, Reporting and Verification Regulation for maritime transport (‘MRV Maritime Regulation’).

In practice, shipping companies have to purchase and surrender (use) EU ETS emission allowances for each tonne of reported CO2 (or CO2 equivalent) emissions in the scope of the EU ETS system. It is the role of administering authorities of EU Member States to ensure compliance using similar rules as for the other ETS sectors.

To ensure a smooth transition, shipping companies only have to surrender allowances for a portion of their emissions during an initial phase-in period:

2025: for 40% of their emissions reported in 2024;
2026: for 70% of their emissions reported in 2025;
2027 onwards: for 100% of their reported emissions.

The first surrendering deadline falls due in September 2025 in all Member States, in respect of emissions reported as taking place from 1 January 2024 to 31 December 2024.

A reporting and review clause is included to monitor the implementation of the rules applicable to the maritime sector and to take into account relevant developments in the International Maritime Organisation (IMO).

These rules were adopted on 16 May 2023 and entered into force on 5 June 2023. You will find the legal texts below:

Legislative process

The legislation on the inclusion of maritime emissions in the EU ETS has been complemented by several implementing and delegated acts. These spell out detailed rules and allow for a timely inclusion of the emissions from maritime transport within the EU ETS.

Those acts notably cover the following topics:

the administration of shipping companies by Member States;
the submission of aggregated emissions data at shipping company level;
rules for the monitoring of greenhouse gas emissions;
updates of the relevant templates;
verification and accreditation procedures;
identification of neighbouring container transhipment ports;
small islands and transnational routes under public service obligation or contract subject to specific provisions under the ETS Directive.

To prepare these acts, the Commission is assisted by a maritime formation within the existing Expert Group on Climate Change Policy (CCEG), where experts from Member States are represented. In addition, the Commission has consulted the European Sustainable Shipping Forum (ESSF) where industry and civil society are also represented. The acts are also prepared with the support of the European Maritime Safety Agency (EMSA).

In October 2023, the EU Climate Change Committee gave a favourable opinion on three implementing acts. These acts have been adopted by the Commission and published in the Official Journal of the European Union:

Three delegated acts have also been published in the Official Journal of the European Union in December 2023:

Also in December 2023, the Commission has adopted an implementing act laying down the list of islands and ports and the list of transnational public service contracts concerned by the specific derogations pursuant to Article 12(3-d) and (3-c) of the ETS Directive:

Commission Implementing Decision (EU) 2023/2895 of 19 December 2023 laying down the list of islands and ports referred to in Article 12(3-d) of Directive 2003/87/EC of the European Parliament and of the Council and the list of transnational public service contracts or transnational public service obligations referred to in Article 12(3-c) of that Directive

The Commission adopted an implementing act on the list of shipping companies on 30 January 2024, specifying their responsible administering authority:

Commission Implementing Decision (EU) 2024/411 of 30 January 2024 on the list of shipping companies specifying the administering authority in respect of a shipping company in accordance with Directive 2003/87/EC of the European Parliament and of the Council

Monitoring, reporting and verifying GHG emissions

Since 1 January 2018, large ships over 5 000 gross tonnage loading or unloading cargo or passengers at ports in the European Economic Area (EEA) must monitor and report related GHG emissions (currently only CO2 emissions, but also nitrous oxide and methane emissions as of 1 January 2024) and other relevant information. Monitoring, reporting and verification (MRV) of information must be done in conformity with the ‘MRV Maritime Regulation.

The MRV Maritime Regulation was conceived as a first step before the inclusion of these emissions within the scope of the EU Emissions Trading System. The MRV Maritime Regulation was revised in 2023 in the light of the inclusion of maritime transport emissions within the scope of the EU ETS.

The MRV Maritime Regulation is complemented by four other legal acts:

Main obligations for companies eligible under the MRV Maritime Regulation:

Monitoring: companies must – in line with their respective monitoring plans – monitor, for each of their ships, greenhouse gas emissions, fuel consumption and other parameters, such as distance travelled, time at sea and cargo carried on a per voyage basis, so as to gather annual data into an emissions report verified by an accredited MRV shipping verifier.
Emissions report: by 30 April of each year (31 March as of 2025), companies must, through THETIS MRV, submit to the Commission and to the States in which those ships are registered (‘flag States’) a satisfactorily verified emissions report for each ship that has performed maritime transport activities in the European Economic Area in the previous reporting period (calendar year). As from 31 March 2025, emissions reports should also be submitted to the responsible administering authority trough THETIS-MRV.
Document of compliance: by 30 June of each year, companies must ensure that all their ships that have performed activities in the previous reporting period and are visiting ports in the European Economic Area carry on board a document of compliance. This might be subject to inspections by Member States' authorities.

Every year, the Commission publishes a report to inform the public about the greenhouse gas emissions and energy efficiency information of the monitored fleet. You can find the annual reports in our Documentation section below.

Delivering the European Green Deal with maritime transport

As part of the European Commission’s legislative proposals to deliver the European Green Deal - the ‘Fit for 55’ package - published on 14 July 2021, several proposals addressed maritime transport’s climate impact, in addition to the extension of the EU ETS.

This includes:

A new FuelEU maritime Regulation to boost the demand for marine renewable and low-carbon fuels, by setting a maximum limit on the greenhouse gas content of energy used by ships calling at European ports and by encouraging zero-emission technology at berth (where ships stay in ports), with a technology-neutral approach;
Revising the Directive on Deployment of Alternative Fuels Infrastructure, which would set, among other benefits, mandatory targets for shore-side electricity supply at maritime and inland waterway ports;
Accelerating the supply of renewables in the EU, through a revision of the Renewable Energy Directive (RED), which increases the current EU target of at least 32% of renewable energy sources in the overall energy mix to at least 40% by 2030, with a focus on sectors where progress has been slower to date – including transport;
Revising the existing Energy Taxation Directive (ETD), which aims to align the taxation of energy products with the EU’s climate objectives and remove outdated exemptions, such as those for the intra-EU maritime transport sector.

This basket of measures reflects the EU’s goal to cut greenhouse gas emissions by addressing the various barriers to the decarbonisation of the shipping sector (technological barriers, economic barriers, etc.). The Commission aims to do that through two complementary angles: first, the improvement of energy efficiency (i.e. using less fuel) and, second, the greater use of renewable and low-carbon fuels (i.e. using cleaner fuels). These measures will allow the creation of a virtuous ecosystem for such cleaner fuels, as they will boost at the same time fuel demand, distribution, and supply.

Besides continuing to push for global action at the International Maritime Organisation (IMO), the Commission will continue supporting research and innovation towards the decarbonisation of maritime transport, in particular through Horizon Europe and the Innovation Fund.