UK ETS for the Maritime Sector
14 hours ago
Reed Smith, in collaboration with DNV Maritime Advisory, hosted ‘The Green Gamble: Balancing Risks and Opportunities in Shipping Investments’ at Reed Smith’s London office. The well-attended half-day seminar brought together over 70 leading advisors, investors, shipping and energy companies, and legal professionals to explore the evolving landscape of sustainable ship finance.
With the maritime industry undergoing unprecedented environmental, geopolitical, and technological transformations, discussions centred on mitigating risks and leveraging opportunities in green finance. Reed Smith’s market-leading shipping practice, alongside DNV, the world’s leading classification society and maritime advisor, provided valuable insights into the shifting regulatory and financial frameworks.
Antonia Panayides, partner in Reed Smith’s Transportation Industry Group, shared updates on emissions regulations, particularly FuelEU Maritime. She said: “The FuelEU Maritime Clause for Time Charter Parties is important for the industry, as the Regulation expressly provides that parties should look to their contractual agreements to implement the ‘polluter pays’ principle.”
Panayides, who served on the BIMCO drafting committee for FuelEU Maritime, highlighted that FuelEU impacts a wide range of shipping contracts. She said: “FuelEU is often overlooked in sale and purchase transactions, but it is a critical factor. If I purchase a vessel today and know it was in deficit from January to March, that shortfall will appear on my books—unless I address it in the remainder of the calendar year. This must be factored into negotiations.
“Similarly, if I am buying or selling a vessel with a surplus from using biofuel, that surplus has tangible value and should be reflected in the transaction.”
The seminar also examined the role of banks in ship lending to support climate targets, transaction risks in green maritime investments, and the impact of upcoming EU and UK regulations.
Tallat Hussain and Wim Vandenberghe, partners at Reed Smith, provided an overview of key regulatory changes, including the EU and UK Emissions Trading Schemes (ETS), to cover maritime emissions, supply chain due diligence and monetising green attributes, as well as the potential impact of changing geopolitical priorities on EU policies and implementation programs.
Hussain stressed the need for the shipping industry to stay ahead of evolving regulations, particularly in emissions trading, stating, “Charterers dictate a vessel’s emissions, raising critical questions that need to be addressed contractually. These include how emissions data is shared and the mechanics of transferring allowances.”
She also noted that that EU sustainability due diligence faces uncertainty, especially if the proposed “Protect USA” Act is passed, which could impact its implementation. “This underscores the need for the EU to remain agile and prepared for potential legislative shifts,” Hussain added.
Susan Riitala, partner in the asset finance team of Reed Smith’s Transportation Industry Group, who co-chaired the event, said: “The lively discussion and enthusiasm from participants underscores the importance of green finance to the maritime industry and we look forward to co-operating with DNV again on future events on this topic.”
Key highlights from the event include: