Mersey Maritime Blog
UK ETS – 05 May 2026 | Simon Eardley – Head of Policy and Innovation
The maritime sector is undergoing a profound transformation as it responds to increasing regulatory pressure to decarbonise. On Tuesday 5th May 2026, a workshop delivered by Hill Dickinson LLP in partnership with Mersey Maritime provided valuable insight into how the UK Emissions Trading Scheme (UK ETS) will apply to shipping and what it means for industry stakeholders. Bringing together legal expertise and sector knowledge, the session highlighted both the opportunities and challenges presented by this evolving regulatory landscape.
A complex global regulatory backdrop
As outlined during the workshop by Colin Lavelle (Hill Dickinson, Partner – Shipping, UK), the UK ETS will not operate in isolation. Instead, it forms part of a broader and increasingly complex global framework aimed at reducing maritime emissions and bringing about decarbonisation in the industry. At the international level, the International Maritime Organisation (IMO) has introduced several measures, including the Energy Efficiency Design Index (EEDI) for new vessels and the Energy Efficiency Existing Ship Index (EEXI), which has been in force since January 2023. These measures focus on improving vessel efficiency through design and operational adjustments, such as engine power limitations and technical innovations.
Additionally, the Carbon Intensity Indicator (CII) seeks to rate vessels based on emissions performance, although adoption of standard industry clauses allocating CII responsibility has been limited. Discussions around a global Net Zero Framework remain ongoing, but progress has been slowed by differing national interests and uncertainty around future fuel solutions both in terms of supply of the ‘preferred’ alternative fuel of the future and the practical infrastructure needed to deliver it. This lack of consensus underscores the difficulty of achieving a unified global approach to maritime decarbonisation.
At a regional level, the European Union’s Emissions Trading System (EU ETS) has already been introduced in phases, with the market responding relatively positively. The UK ETS draws heavily from this model, reflecting an ambition to place a price on carbon and incentivise emissions reductions. Other similar schemes are anticipated in other parts of the world which will add further to the complexity of the regulatory framework.
Understanding the UK ETS for maritime
The core detail of the UK ETS in maritime regulatory framework was presented by Beth Bradley (Hill Dickinson, Partner – Marine).
The UK Government published detailed plans for extending the UK ETS to maritime in January 2026, with implementation scheduled for 1 July 2026. The scheme will apply to emissions generated within UK waters and ports, covering domestic voyages, round trips, and time spent at berth.
In practical terms, the UK ETS requires shipping operators to monitor, report, and verify their emissions, and to purchase allowances corresponding to those emissions if necessary. The overarching aim is to introduce a financial cost that encourages innovation and drives decarbonisation across the sector.
Responsibility for compliance sits primarily with the vessel’s registered owner, although this can be reassigned contractually. Operators will also be required to submit an emissions management plan via the “METS: Manage Your UK Emissions Trading Scheme” online portal, which details how they intend to monitor and control emissions.
The scheme will initially focus on domestic emissions but is expected to expand to cover international voyages from 2028, further increasing its scope and impact.
The UK ETS introduces a significant administrative burden alongside its financial implications. The Environment Agency will oversee enforcement in England, with equivalent bodies operating in Scotland, Northern Ireland and Wales and for the offshore oil and gas sector. Compliance is non-negotiable: all emissions must be accurately reported, with penalties of £100 per tonne of CO₂ for non-compliance, subject to inflation adjustments.
The regulations apply not only to CO₂ but also to methane and nitrous oxide emissions, broadening the environmental scope. However, certain vessels are excluded, including those engaged in UK Government activities, fishing vessels, and those serving remote Scottish island communities.
Commercial implications for the maritime sector
A central theme of the workshop was the commercial impact of the UK ETS. The introduction of carbon pricing represents a fundamental shift for the industry, adding both cost and complexity to operations.
Shipping companies will need to make strategic decisions about how many allowances to purchase and when. As these allowances are tradeable, their price will fluctuate, potentially significantly, creating financial uncertainty. Larger operators may have the capacity to purchase and hold allowances strategically, raising concerns about market dynamics and fairness.
Contractual arrangements will also come under increased scrutiny. Questions around who bears the cost of emissions, such as owners, charterers, or cargo interests, will need to be clearly defined. As maritime operations often follow the straightforward model of “have cargo, find ship, move it,” the addition of emissions considerations introduces a new layer of planning complexity.
Importantly, the scheme applies based on activity within UK waters rather than the domicile of the operator, ensuring a level playing field but also broadening its reach. This might present a competitiveness challenge too.
Industry concerns and challenges
The necessity and challenge of decarbonisation within the maritime sector is well known, understood and increasingly being responded to. Addressing it underpins significant UK Government investment, such as via the UK SHORE programme which is approaching nearly three quarter of a £billion of investment in this imperative.
While the UK ETS is designed to drive change, several concerns were raised during the workshop. One key issue is the tight timeline for implementation, which many stakeholders feel could leave insufficient time for preparation.
Another major concern is the availability of alternative fuels and supporting infrastructure. Without viable low-carbon options or a commitment that the funds resulting from the application of UK ETS / purchase of carbon allowances will be re-invested in developing alternative maritime fuels and infrastructure, there is a risk that the scheme will function more as a “carbon tax” than a true incentive for innovation. Related to this is the issue of “carbon leakage,” where companies may seek to avoid regulation by moving from and operating outside of UK jurisdiction.
Participants also highlighted the question of how revenues generated from the scheme will be used. Currently, funds will go to HM Treasury, with no guarantee they will be reinvested in maritime decarbonisation projects such as shore power infrastructure, something which is desperately needed and essential for the wider maritime decarbonisation journey. Many in the sector have called for these revenues to be ring-fenced to support the transition, including the UK Chamber of Shipping.
The future…
The UK ETS represents a significant step forward in aligning the maritime sector with national and international climate goals. However, as emphasised throughout the workshop, it is just one piece of a much larger puzzle. Effective decarbonisation will require coordinated action across global, regional, and national levels, as well as investment in new technologies and fuels.
Organisations such as Lloyd’s Register continue to advocate for a globally consistent approach, arguing that fragmented regulation risks undermining progress. In the meantime, shipping companies must navigate a “patchwork” of requirements, balancing compliance with commercial viability.
Thank you, Hill Dickinson!
We extend our sincere thanks to Hill Dickinson colleagues for delivering such an insightful and informative workshop. Their expertise and commitment to keeping members informed on complex regulatory developments like the UK ETS are invaluable to our maritime ecosystem here in the Liverpool City Region and wider North West.
Find out more about the UK ETS, in particular the outcome of the recent consultation around it, HERE.
