EU ETS Costs Jump 72% as Maritime Sector Faces Full Emissions Compliance
As of January 1, 2026, shipping companies must surrender allowances for 100% of verified emissions on EU voyages. The inclusion of methane and nitrous oxide further amplifies the compliance burden.
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What Happened
The European Union Emissions Trading System (EU ETS) entered a critical new phase on January 1, 2026, with shipping companies now liable for full emissions compliance.
2026 EU ETS changes:
- Emissions coverage: 100% (up from 70% in 2025, 40% in 2024)
- New gases covered: Methane (CH₄) and nitrous oxide (N₂O) now included
- EUA price projection: €86/mtCO2e ($99.78) average for 2026 (18.9% increase in USD terms)
Cost impact for VLSFO on intra-EU voyages:
- 2026 ETS compliance cost: $319.30/mt (72.6% increase from $185.04 in 2025)
- Underlying fuel price: $370/mt Rotterdam (22.4% decrease vs 2025)
- Total all-in cost: $689.30/mt (4.2% higher than 2025 despite fuel price drop)
ETS costs by fuel type (2026 projections):
- VLSFO: $319.30/mt
- HSFO: $315.60/mt
- MGO: $324.78/mt
2026 EU ETS changes:
- Emissions coverage: 100% (up from 70% in 2025, 40% in 2024)
- New gases covered: Methane (CH₄) and nitrous oxide (N₂O) now included
- EUA price projection: €86/mtCO2e ($99.78) average for 2026 (18.9% increase in USD terms)
Cost impact for VLSFO on intra-EU voyages:
- 2026 ETS compliance cost: $319.30/mt (72.6% increase from $185.04 in 2025)
- Underlying fuel price: $370/mt Rotterdam (22.4% decrease vs 2025)
- Total all-in cost: $689.30/mt (4.2% higher than 2025 despite fuel price drop)
ETS costs by fuel type (2026 projections):
- VLSFO: $319.30/mt
- HSFO: $315.60/mt
- MGO: $324.78/mt
Why It Matters
The EU ETS expansion fundamentally changes shipping economics in European trades. Regulatory costs have completely offset the significant drop in underlying fuel prices—a 22% fuel price reduction results in a net 4% cost increase.
The methane inclusion particularly impacts LNG-fueled vessels, which have been marketed as a cleaner transition fuel. Methane slip from LNG engines now carries a significant cost, potentially undermining LNG's competitive advantage.
Non-compliance consequences are severe: €100 per tonne of CO2e penalty, plus potential expulsion orders banning non-compliant ships from EU ports.
The methane inclusion particularly impacts LNG-fueled vessels, which have been marketed as a cleaner transition fuel. Methane slip from LNG engines now carries a significant cost, potentially undermining LNG's competitive advantage.
Non-compliance consequences are severe: €100 per tonne of CO2e penalty, plus potential expulsion orders banning non-compliant ships from EU ports.
What It Affects
Costs: EU-connected voyages face sustained higher costs regardless of fuel price movements.
Operations: Emissions monitoring, reporting, and verification (MRV) systems essential for compliance.
Capacity: Higher costs may discourage some carriers from EU trades, affecting service options.
Risk: Allowance price volatility creates budget uncertainty; consider hedging strategies.
Operations: Emissions monitoring, reporting, and verification (MRV) systems essential for compliance.
Capacity: Higher costs may discourage some carriers from EU trades, affecting service options.
Risk: Allowance price volatility creates budget uncertainty; consider hedging strategies.
What to Watch Next
- EUA price movements through 2026
- EU Commission review potentially extending ETS to smaller vessels (400-5,000 GT)
- Carrier ETS surcharge transparency and methodology
- Alternative fuel adoption acceleration in response to costs
- EU Commission review potentially extending ETS to smaller vessels (400-5,000 GT)
- Carrier ETS surcharge transparency and methodology
- Alternative fuel adoption acceleration in response to costs