EU ETS Charter Party Clauses: Who Pays?

Who pays for EU ETS allowances under a charter party?

EU ETS applies to the ship and a defined share of its voyages. The charter party, rather than the regulation, allocates the allowance cost between commercial parties. The regulation decides only who is liable to the authority: the “shipping company”, which may be the owner or a duly mandated ISM manager. In a time charter, the charterer commonly controls voyage decisions that drive emissions, so the cost often sits with the charterer. In a voyage charter, the owner quotes fixed freight and must absorb or pass through that cost. If the fixture does not say how delivery, cost, data, timing and default are handled, the parties settle it later, under pressure.

Scope before allocation. EU ETS maritime covers the Annex I activity in Directive 2003/87/EC, by reference to Regulation (EU) 2015/757: ships of 5,000 GT and above that carry cargo or passengers for commercial purposes. MRV and ETS do not cover the same ships. Offshore ships of 5,000 GT and above have reported under MRV since 1 January 2025. Annex I excludes them from ETS until 31 December 2026, so they enter from 1 January 2027. General cargo and offshore ships of 400–5,000 GT entered MRV on the same date. Article 3ga counts 100% of emissions between two EU ports of call and within an EU port of call, and 50% on voyages into or out of the EU. The Article 3gb phase-in percentage then applies to that geographic figure. A clause or invoice that conflates those two multipliers mis-states the quantity.

Ships of 400–5,000 GT: scope under review, not settled. Under the rules in force today, general cargo and offshore ships of 400–5,000 GT report under MRV but do not surrender allowances. That position is open. Article 3gg(5) of the Directive required the Commission to report on these ships by 31 December 2026, and the Commission’s maritime ETS FAQ (FAQ content last updated 2 April 2025) states that their inclusion “starting 2028 is to be considered as part of the ETS review”. On 17 July 2026 the Commission proposed, in COM(2026) 616 final (procedure 2026/0212(COD)), to bring certain categories of ships in that band into the ETS: oil tankers, chemical tankers, gas carriers, LNG carriers, general cargo ships and offshore vessels. The proposed Annex I excludes them only “until 31 December 2030”, so their emissions would count from 1 January 2031. That is the date emissions would enter scope, not the date allowances fall due: under the normal annual cycle in Article 12(3) of the Directive, allowances for 2031 emissions would have to be surrendered by 30 September 2032. All of this is a proposal, not law: Parliament and Council still have to agree it, and the dates can change. The proposed Annex I row relies on MRV scope provisions that the companion proposal COM(2026) 620 final (2026/0210(COD)) would add; 400–5,000 GT oil, chemical, gas and LNG carriers are not in MRV today, and ro-pax and passenger ships in that band are left out. Our report on the Commission proposal sets out the ship types and dates. For a long fixture on a ship in that band, check whether the charter party says what happens if the ship comes into ETS scope during the charter period.

2026 update: methane and nitrous oxide. From 2026 the EU ETS covers methane (CH4) and nitrous oxide (N2O) emissions from ships as well as CO2. MRV has covered all three since 2024, but only CO2 counted towards surrender for 2024 and 2025 (European Commission, maritime ETS FAQ). Emissions from 2026 voyages are surrendered for by 30 September 2027. A clause, formula or invoice template drafted for 2024 or 2025 that refers only to CO2 should be checked against that wider scope. Background: EU ETS and FuelEU 2026: methane counts.

For regulatory mechanics and the compliance cycle, see our EU ETS shipping compliance guide. This page addresses the charter-party terms that align the compliance obligation with the agreed commercial cost.

EU ETS identifies the compliance party, not the commercial payer

EU ETS creates a regulatory relationship with the “shipping company”. Article 3, point (w), of Directive 2003/87/EC, inserted by Directive (EU) 2023/959, defines that party as the shipowner, or another organisation or person, such as a manager or bareboat charterer, that has assumed responsibility for ship operation from the shipowner and agreed to take over all ISM Code duties and responsibilities. Article 1 of Implementing Regulation (EU) 2023/2599 adds a further condition. If that organisation or person has also assumed ETS obligations, the shipowner must duly mandate it and it must give its administering authority a document that clearly shows that mandate. The party answerable to the administering authority can therefore be the ISM company rather than the registered owner, and neither need be the party that ends up carrying the cost.

The shipping company surrenders by 30 September each year allowances equal to its total verified emissions from the preceding calendar year. Article 3gb of Directive 2003/87/EC, as amended by Directive (EU) 2023/959, phases in the requirement at 40% of verified emissions reported for 2024, 70% for 2025, and 100% for 2026 and each year thereafter. The regulatory compliance party often differs from the party whose decisions on route, speed, port calls and idle time determine the allowance cost. The charter party allocates that cost between the parties.

An “EU ETS clause” has no single standard commercial result. What matters is how the fixture turns a regulatory cost into a contractual obligation. Two ETS-compliant fixtures can allocate cost in opposite directions because their charter parties made different choices.

The gap between compliance debt and commercial cost

Compliance debt follows the ship’s reported activity for a period. Commercial cost follows the charter party. Article 3gc requires Member States to ensure that, where another entity assumes ultimate responsibility under a contractual arrangement for fuel purchase, ship operation, or both, the shipping company can recover allowance-surrender costs from that entity. “Operation of the ship” means determining the cargo carried, or the route and the speed of the ship. The shipping company remains responsible for surrendering allowances. Reimbursement does not suspend that duty. The clause sets the formula, data and due date for the right.

A silent fixture may leave the shipping company with an expense and a claim under national transposition of Article 3gc. That provision does not give an automatic claim against any charterer. It applies where the counterparty has ultimate responsibility for fuel purchase or for determining the cargo carried, or the route and the speed, under a contractual arrangement. Applicable law and the contract as a whole determine whether a silent fixture meets that test. A counterparty may also receive an invoice for an allocation it never agreed. In either case, the dispute arises at settlement, after the voyage and after the data trail has become harder to reconstruct.

A clause that closes this gap usually names the party that delivers allowances or their cost equivalent, the party that bears the commercial cost, and the path that sends activity data from the ship to the party calculating the quantity.

Time charter, voyage charter, bareboat: different cost positions

Charter structure affects control over route, speed, consumption and idle time. BIMCO provides separate clauses for time, voyage and bareboat chartering, plus a management-agreement clause.

Apeks Tech diagram: regulatory liability (top) versus commercial cost under the BIMCO default positions described below. It is not legal advice; the fixture’s own wording governs.

Time charter. The charterer directs employment within the charter terms, including destination, speed and idle time. BIMCO’s ETS – Emission Trading Scheme Allowances Clause for Time Charter Parties 2022 follows the principle that the fuel payer provides and pays for allowances. Under a conventional time charter, that party is the charterer. Owners monitor and report emissions, then provide charterers with emissions data and calculation bases. Charterers transfer allowances, rather than cash, monthly to the owners’ nominated scheme account. BIMCO selected allowance transfer to avoid price fluctuation in the bargain. The clause includes an off-hire adjustment and a remedy for late transfer. “Charterer pays” alone does not provide that mechanism.

Voyage charter. The owner quotes freight for a specified cargo and route. Control over emissions drivers varies by fixture because cargo, ports, alternative orders, laytime and demurrage are negotiated terms. BIMCO published three alternatives in 2023, intended as alternatives rather than clauses to stack: the Emission Scheme Freight Clause, under which cost sits in freight; the Emission Scheme Surcharge Clause, under which the charterer pays an agreed cash amount with an optional bunker-adjustment-factor-style spot-price adjustment; and the Emission Scheme Transfer of Allowances Clause, under which the charterer transfers an agreed or estimated allowance quantity with post-voyage reconciliation where the quantity remains open. Combining or amending them requires legal review of overlaps. Each clause places scheme compliance, including surrender, contractually with owners; they differ only in how the cost reaches owners. That is an allocation between the contracting parties, not a statement of who is liable to the regulator. Towards the administering authority, the liable party is the “shipping company” under Article 3(w) of the Directive: the shipowner, or an ISM company such as a manager that has taken over all ISM Code duties and, under Implementing Regulation (EU) 2023/2599, holds the shipowner’s mandate for the ETS obligations. Where a manager holds that mandate, “owners” in the voyage charter and the regulated entity are different companies, and the owner–manager agreement has to carry the obligation and the recovered cost through. BIMCO notes that freight-inclusive cost will likely become commissionable. Its drafting subcommittee stated that surcharge payments and allowance transfers should generally not attract address or brokerage commission. That is a stated view, not a guarantee, so check the fixture’s commission and brokerage terms. Failure to pay a surcharge or transfer allowances counts as non-payment of freight under both routes.

Bareboat charter. The charterer takes over ship operation, including crewing and technical management, for the charter period. Commercial responsibility therefore sits closer to the charterer. Regulatory liability still requires the statutory conditions: a bareboat charterer becomes the shipping company only after taking over ISM duties from the shipowner, and carries ETS obligations only after the shipowner duly mandates it. BIMCO’s ETS – BARECON Emission Trading Scheme Allowances Clause 2026 requires an election of the “Responsible Entity”. If neither party elects one, the default is the charterers or their nominee. If the charterers are the Responsible Entity, owners must provide a duly executed mandate letter in the form required by the administering authority. Both parties must co-operate to revoke it at expiry or termination. BIMCO’s Standard ETS Mandate 2024 supports the 2023/2599 mandate, while warning that an administering authority in an individual Member State may impose its own requirements.

Third-party managed ships. If the ISM company is a manager, the mandate issue arises outside the charter chain. BIMCO’s ETS – SHIPMAN Emission Trading Scheme Allowances Clause 2023 covers owners as responsible entity and managers who become responsible under the scheme or agreement. BIMCO advises the parties to consider the consequences of owners granting, and managers accepting, the mandate in a signed document before incorporation.

These are default tendencies. The fixture controls.

Five decision points to check in an ETS clause

These five points are Apeks Tech’s editorial checklist for reading a clause. They are not a list of contents that EU ETS law requires every charter party to contain. The BIMCO standard forms each solve the problem in their own way: the time charter clause works through monthly allowance transfers against owners’ data, with its own off-hire adjustment; the three voyage charter clauses are alternatives, and the freight clause puts the cost inside the freight, with no separate data-flow, audit or dispute machinery because no separate ETS figure is invoiced; the BARECON clause turns on electing the Responsible Entity. Where a fixture uses an unamended BIMCO form, read the form’s own terms first and use the table to see what it leaves out by design. The checklist is most useful for bespoke clauses and amended forms.

Decision point	Question to ask	Risk if not addressed
Delivery	Who transfers allowances, or their cost equivalent, to the shipping company that must surrender them	The shipping company buys allowances without a recovery mechanism
Cost allocation	Who bears commercial cost and under which formula or trigger	Both parties expect the other to pay; the issue appears at settlement
Data flow	Who supplies consumption, distance and port-time data, and who may audit it	The paying party cannot verify the charge
Timing	When cost is calculated, invoiced and due	A party pays after the voyage has closed and records are harder to reconstruct
Default	What follows a failure to supply data, pay or resolve a disputed figure	The allocation dispute has no contractual fallback

Read a proposed clause against the table. A long clause may omit a point; a short clause may cover each one.

The reporting calendar affects timing. Under Regulation (EU) 2015/757 as amended, the company submits its verified emissions report and verified company-level aggregated emissions data for the prior reporting period by 31 March. Article 11(1), second subparagraph, and Article 11a(3) permit an administering authority to require earlier submission, but no earlier than 28 February. Surrender falls due on 30 September. Monthly time-charter transfers and freight-linked voyage-charter payments therefore precede the verified annual figure by months. The clause should identify the governing figure and the reconciliation method.

The evidence chain: ship records and commercial calculations

A paper allocation works only if the parties can produce and check the supporting data.

Onboard records. Consumption logs, voyage data and records used for monitoring and reporting under Regulation (EU) 2015/757 provide the inputs for the shipping company’s surrender calculation. The company holds the monitoring and reporting duty. Its approved monitoring plan allocates work between ship and shore office. A charterer disputing an invoice months later will seek these records, and a contemporaneous log carries more weight than a reconstructed one.

Shore-side work. Commercial operations and the chartering desk convert voyage data into the invoice or reimbursement required by the cost-allocation clause. They should be able to show the calculation as well as the total. Standard clauses do not always grant audit rights, but a party paying a separate ETS charge benefits from a right to inspect its supporting data.

A cost allocation without data access leaves the payer unable to check the invoice.

Negotiation checklist: apparently symmetric terms

• “Charterer pays ETS costs” needs a formula or a reference to reported data. Ask how the parties calculate the figure and what source they use.
• Reimbursement tied to hire payments needs reconciliation to actual consumption if periodic hire includes ETS cost.
• Audit rights let the paying party inspect the data behind a charge rather than accept an invoice without support.
• Off-hire interaction needs attention in a time charter. BIMCO’s clause lets charterers offset allowances due during off-hire or require owners to return allowance equivalents for emissions that would otherwise have fallen on charterers, following the logic of repaying off-hire bunkers. A bespoke clause that omits an equivalent off-hire credit, hire adjustment or cash reconciliation may leave charterers paying for owners’ time.
• Sub-charter and back-to-back chains require consistent allocations at each link. A party in the middle may lack a matching recovery right.
• Silence as default should not be assumed to resolve through general cost clauses. Confirm the position expressly.

Dispute triggers

• Data disagreement. The payer challenges reported consumption or voyage data, while the clause provides no method to resolve the disagreement.
• Delay attribution. Delay increases the allowance requirement. BIMCO’s voyage-clause explanatory notes state that extended port stays drive this issue and demurrage already compensates them. Owners can price residual exposure through laytime and demurrage, while owners bear the risk of sea-passage delay from causes such as adverse weather. A fixture that changes this split should say so.
• Delivery and redelivery. BIMCO’s time-charter clause places allowance responsibility on charterers from delivery to redelivery. If delivery occurs on a basis such as dropping last outward sea pilot at an EU port, the next port called determines whether the following leg counts at 100% or 50%. BIMCO’s explanatory notes say that if the parties want a different result, they must address it in negotiation.
• Stops that are not port calls. The Directive excludes ship-to-ship transfers outside ports; stops solely for refuelling, supplies, crew change other than for offshore ships, dry dock or repairs; stops where the ship needs assistance or is in distress; stops solely for shelter from adverse weather or required by search and rescue; and containership stops at a neighbouring container transhipment port on the Commission’s list. These exclusions define the start and end of a voyage for scope; they do not exempt emissions. The leg runs from the preceding real port of call. For the listed transhipment-port case, that rule deliberately brings more emissions into scope. Check allowance quantity against the definition for trades that include these stops.
• Chain breakdown. Different clauses in a sub-charter chain may leave an intermediary contractually short.

Drafting gaps drive many disputes. Scope percentages, the port-of-call definition and the verified MRV figure remain regulatory inputs. A complete clause identifies who relies on which evidence; it does not remove regulatory calculation questions.

Before the next fixture: a decision path

1. Identify the structure. In a time charter, the fuel payer provides allowances monthly against owners’ data and calculations. In a voyage charter, select freight-inclusive, surcharge or allowance transfer; each places compliance contractually on owners, while the entity liable to the administering authority may be a mandated ISM manager. In a bareboat charter, elect the Responsible Entity. If charterers hold that role, ETS liability still requires ISM responsibility and the shipowner’s mandate letter. Confirm whether the fixture follows or departs from these positions and why. For a ship of 400–5,000 GT on a charter running into the 2030s, ask what the clause does if the ship enters ETS scope during the period.
2. Run the five-point checklist. See whether the clause, or the standard form it incorporates, deals with delivery, cost allocation, data flow, timing and default. A missing point may be deliberate, as in the freight-inclusive voyage route, or simply unaddressed in an amended or bespoke clause. Establish which before signing.
3. Check access to the calculation. Flag a clause that gives one party a figure without audit rights, regardless of cost allocation.
4. Read off-hire with the ETS clause. Confirm the adjustment of allowances and consistency with demurrage and laytime provisions on delay.
5. Match sub-charter links. An internally consistent clause can still leave an intermediary exposed if adjacent fixtures allocate cost differently.

If any answer remains “unclear,” raise it before the fixture closes. Article 3gc provides a conditional reimbursement right, not its contractual terms.

For the same owner-versus-charterer split set out side by side under the common clause structures, see the EU ETS owner vs charterer breakdown; for the compliance process this cost calculation sits on top of, see the EU ETS shipping compliance guide. EU ETS and FuelEU Maritime are separate regimes with separate cost logic. For the broader 2026 regulatory load this clause sits inside, see regulations affecting shipowners in 2026 and the IMO Net-Zero Framework. On the evidence-chain discipline this clause depends on, see spreadsheets vs. evidence-based fleet oversight, and on the data-capture limits that make audit rights harder to exercise on older tonnage, see the maritime tech frontier on existing fleets.