UK Shipping Industry Warns of High Costs and Risks from ETS Extension to Domestic Vessels

UK shipping industry leaders have voiced strong concerns over the government’s plan to extend the UK Emissions Trading Scheme (UK ETS) to domestic maritime operations from July 1, 2026, warning that the move could raise costs, impact island communities, and undermine competitiveness without delivering significant emissions reductions. The Draft Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026 was passed in the Commons on February 11, drawing criticism from industry groups for what they described as limited parliamentary scrutiny.

Under the extended UK ETS, vessels of 5,000 gt and above operating on domestic routes between UK ports will be required to monitor, report, and surrender allowances for 100% of carbon dioxide, methane, and nitrous oxide emissions, including those generated while in port. Offshore vessels will come under the scheme’s scope starting in 2027. The first reporting period will run from July 1 to December 31, 2026, with verified emissions reports due by March 31, 2027. A one-off “double surrender” provision will allow operators to submit 2026 and 2027 allowances together by April 30, 2028. Non-compliance will trigger a penalty of £100 per tonne of CO₂ equivalent, indexed for inflation, in addition to making up the shortfall.

The UK Chamber of Shipping emphasized that while the sector supports national climate goals, the timing and structure of the rollout present serious challenges. Alternative fuels remain four to five times more expensive than conventional marine fuels, and most UK ports currently lack the shore power and grid capacity to support low-carbon operations. Industry leaders warn that without reinvestment of ETS revenues into decarbonisation measures, the scheme risks becoming a cost burden rather than an effective transition tool.

Particular concern has been raised for ferry-dependent and island communities, where operators may struggle to absorb additional costs. While Scottish island routes benefit from safeguards under the EU ETS, similar protections have yet to be confirmed under the UK framework. The Chamber has urged that ETS revenues from shipping be ringfenced for shore power, grid upgrades, vessel retrofits, and clean fuel development. They also recommend alignment with the EU ETS to prevent double charging and carbon