Background

Emission Schemes are “cap and trade” schemes that cap the total amount of greenhouse gases to be emitted by certain vessels covered by the system.  Over time, this cap is reduced as an incentive to reduce greenhouse gas emissions through increased efficiency and the use of alternative fuels.

In the context of the world’s largest Emission Scheme – the European Union Emissions Trading System (EU ETS) – the cap is expressed in emission allowances, where one emission allowance gives the right to emit one tonne of carbon dioxide (CO2) equivalent.  For each year, shipping companies must surrender enough emission allowances to fully account for their emissions. In the absence of a uniform global Emission Scheme, other countries and/or groups of countries may develop their own unique Emission Schemes in the future, and this clause is designed to be broad enough to cater for not only the EU ETS but for any other similar Emission Schemes that are imposed.

Drafting Team

The BIMCO ETS – Emission Scheme Freight Clause for Voyage Charter Parties 2023 is the result of a collaborative and consensual process between owners, charterers, a FDD Club and legal experts. BIMCO is grateful to the following individuals:

Peter Eckhardt, F. Laeisz (Chairperson)

Panos Zachariadis, Atlantic Bulk Carriers Management Ltd.

Takaaki Hashimoto, NYK

Harry Fafalios, Union of Greek Shipowners

Kyriakos Kourieas, Interorient Marine Services Limited

Simon Spark, Oldendorff Carriers

Ann Shazell, Cargill Ocean Transportation

Alessio Sbraga and Joseph Malpas, HFW

Caroline Lindfors, Nordisk Defence Club

BIMCO representatives:

Stinne Taiger Ivø

Natalie Wong

Carl Lindahl

Explanatory Notes

These explanatory notes are intended to provide an insight into the thinking behind the BIMCO ETS – Emission Scheme Freight Clause for Voyage Charter Parties 2023. 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.

Key Features of the Clause

Definitions

For ease of reading, the clause sets out two definitions – “Emission Allowances” and “Emission Scheme”.

“Emission Allowances” are the emission 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 equivalent.

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

These two definitions are identical to those that appear in the ETS - Emission Trading Scheme Allowances Clause for Time Charter Parties 2022.

Subclause (a)

This subclause stipulates that the freight due under the charter party includes all costs arising from the surrender of Emission Allowances corresponding to the vessel’s emissions under the scope of the applicable Emission Scheme for the voyage(s) performed under the charter party. It is intended to be reflect the outcome of a commercial agreement between the parties on the appropriate amount of Emission Scheme-related costs associated with surrendering the required allowances for the voyage(s), which can simply be factored into the freight rate.

However, by including such costs in the freight payable under the charter party, it is likely that such cost will become commissionable.

Subclause (b)

This subclause underlines the fact that once the owners receive the full payment of freight, this releases the charterers from any responsibility for costs arising from the surrender of Emission Allowances for the voyage(s) performed under the charter party. However, this is always subject to subclause (c). 

Subclause (c)

This subclause addresses a scenario where the vessel may release more emissions than anticipated due solely to the charterers’ breach of the charter party. For example, the vessel may be detained solely due to the charterers being in breach of the charter party. In this case, this subclause allows the owners to recover any costs arising from the surrender of Emission Allowances for the emissions released during such period of detention.

Subclause (d)

This subclause stipulates that the obligation for compliance with the applicable Emission Scheme rests solely with the owners. This is intended to clarify that the charterers shall not be responsible for compliance with the relevant Emission Scheme.