Emissions Trading Scheme Clause for Memoranda of Agreement 2025

Background

Emission trading systems (ETS) are “cap and trade” schemes, that permit the emission of greenhouse gases in exchange for allowances. Over time the quantity of allowances available to industry are reduced as an incentive to reduce emissions through increased efficiency and the use of alternative fuels.

The world’s largest ETS is operated by the European Union who have recently added the shipping industry to their scheme as part of the “Fit for 55” package. In the absence of a “global” scheme, other countries may also develop their own ETS.

Drafting team

The BIMCO ETS Clause for Memoranda of Agreement (MoAs) 2025 is the result of a collaborative and consensual process between owners, shipbrokers, a P&I club and legal experts. BIMCO is grateful to the following individuals:

• Francis Sarre, CMB Tech (Chairperson)
• Adam Emilianou, Eastern Pacific Shipping 
• Christoph Bruhn, Bruhn Shipbrokers 
• Peter Graff, Steem1960 
• Sarah McCann, NorthStandard P&I Club
• Andreas Grammes, Schachow Law Firm 
• Keith Krut, Hannaford Turner Law Firm 

BIMCO was represented by:

• Stinne Taiger Ivø
• Carl Wilhelm Lindahl
• Vasileios Patonis

As part of the development work, the subcommittee consulted a large group of stakeholders engaged in shipping and decarbonisation. BIMCO would like to thank them all for their support and valuable input to the process.

Explanatory Notes

The following notes are intended to provide an insight into the thinking behind the BIMCO Emissions Trading Scheme Clause for Memoranda of Agreement 2025. They also explain how the clause is intended to operate and the allocation of responsibilities and costs between the parties. If you have any questions about the clause, please contact us at contracts@bimco.org and we will be happy to assist.

Throughout the clause any references to Emission Scheme have been amended to Emission Scheme(s) to cater for situations where more than one emission scheme may be applicable. To ensure consistency, the term “delivery” is not capitalised as this term is not defined under all standard agreements for the sale and purchase of vessels. 

Definitions

For uniformity and ease of reading, the clause adopts the definitions used in the BIMCO Emission Trading Scheme Allowances Clause for Time Charter Parties 2022, with the addition of three new definitions of “Reporting Period”, “Verifier” and “Verified Partial Emission Report”. 

“Emission Allowances” are the allowances issued by an authority under a “cap and trade” regulatory scheme that give the holder the right to emit an agreed volume of greenhouse gases. Under the EU ETS, each allowance entitles the holder to emit one tonne of CO2. 

“Emission Scheme” refers to the applicable emissions trading scheme for greenhouse gases. This clause is designed to apply to future emissions schemes that may be implemented around the world, not just the EU ETS.

“Verified Partial Emission Report” refers to a report verified by the verifier, which confirms the vessel’s emissions for the reporting period in which delivery will occur. This report will not cover the entire reporting period but only that part of the reporting period during which the vessel was under the ownership of the sellers. 

Subclause (a)

Subclause (a)(i) requires sellers to warrant and undertake that at the time of delivery they will have complied with all reporting obligations under any applicable emission scheme for the reporting period in which delivery occurs. 

Subclause (a)(ii) stipulates that sellers must submit a verified partial emission report in accordance with any applicable emission scheme. The words “(or equivalent)” have been added to future proof this subclause, ensuring it remains applicable should different emissions schemes refer to such a document using alternative terminology.

It should be noted that under the EU ETS, after a ship changes ownership, the sellers shall submit a verified partial emissions report to the administering authority within three months after the change, as specified in the MRV Regulation, Article 11 (2). In addition, it is important to note that a ship can only be assigned to one company at a time in the relevant database (THETIS-MRV) and therefore, in order to avoid complicating the completion of the aforementioned responsibilities, it is recommended that the verified partial emissions report is submitted before the ship is transferred to the buyers on the database.

Further, under subclause (a)(iii) the sellers are obliged to provide evidence of submission of the verified partial emission report (or equivalent document) to the buyers upon request. 

Subclause (b)

This subclause stipulates that the sellers remain responsible for the emission allowances in respect of the period up to delivery. The underlining purpose of this subclause is to provide a clear allocation of responsibilities between the sellers and the buyers as regards surrendering emission allowances.

According to the official guidance provided by the EU, the sellers under the EU ETS are responsible for surrendering allowances corresponding to emissions from their ships during the time the ship(s) were under their responsibility. For example, if there is a change of ownership from Company A (sellers) to Company B (buyers) on 1 April 2025, then in 2026, Company A will need to surrender allowances corresponding to emissions from that ship from 1 January to 1 April 2025. It transpires that the buyers are not responsible for surrendering emission allowances in respect of the period prior to delivery during which they were not the owners of the vessel.

Subclause (c)

This subclause stipulates that following delivery of the vessel to the buyers, any responsibilities associated with the emission allowances under the applicable emission scheme(s) rest solely with the buyers. 

According to the official guidance issued by the EU, under the EU ETS, these responsibilities include informing the administering authority of the change of ownership, notifying an accredited verifier and submitting an updated monitoring plan. Also, after the end of the reporting period, the buyers must submit an emissions report for the entire reporting period of the previous year, which has been verified as satisfactory by a verifier. This is true regardless of company changes and of who is responsible for surrendering allowances for these emissions. The emissions report should cover the entire reporting period, and for the portion of the year during which the ship was under the sellers’ responsibility, the report will rely on the partial emissions report submitted by that previous company.

Subclause (d)

This subclause includes an indemnity by the sellers to the buyers to the effect that if any claims, losses, damages, or liabilities arise as a result or in connection with any non-compliance or failure to surrender emissions allowances under the applicable emission scheme(s), then the sellers must indemnify and hold the buyers harmless. 

The intention of this subclause is to ensure that the buyer is protected from inheriting any hidden liabilities or potential retrospective enforcement actions or penalties related to the seller’s obligations prior to delivery.

An important consideration is that the sellers may be a “one-ship company” which has no assets except the vessel and is usually dissolved after selling the ship. Therefore, the issue of guarantees and security that may be provided to the buyers is important but has nevertheless been deliberately left outside the scope of the clause, leaving it to the parties to agree on appropriate arrangements based on the specific circumstances, available information, and their respective risk profiles. 

Sale of a vessel with a time charter party attached

Where a vessel is sold with a time charter party attached, the parties should be aware that the allocation of ETS responsibilities under the MoA operates independently from any ETS allocation agreed under the charter party. In practice, the transfer of the vessel will normally be accompanied by a novation agreement (such as the BIMCO Standard Novation Agreement for the Transfer of Ownership) through which the buyer assumes the rights and obligations of the owner under the existing charter party. Any ETS related responsibilities arising under the charter should therefore be addressed in the novation documentation rather than in the MoA. 

This clause does not attempt to regulate the interaction between sale and purchase obligations and charter party responsibilities. Parties are encouraged to ensure that the charter party’s ETS provisions (for example the BIMCO Emission Trading Scheme Allowances Clause for Time Charter Parties) are properly reflected in the novation so that operational and compliance responsibilities remain aligned across all contractual layers.

Copyright and Availability

Copyright in the BIMCO ETS – Emission Trading Scheme Clause for Memoranda of Agreement (MoAs) 2025 is held by BIMCO.