Philippos Ioulianou is managing director of EmissionLink. Image Credit: EmissionLink

With events in and around the Strait of Hormuz demanding the industry’s attention, it is entirely understandable that many shipping companies are focused first on immediate operational, commercial and safety concerns.

When geopolitical tensions rise in such a critical trading corridor, management attention is naturally drawn to risk exposure, vessel movements, security and market disruption. With less than 100 days to go before the UK Emissions Trading Scheme expands to maritime on July 1, however, this couldn’t have come at a more challenging time.

Across our industry, many compliance and commercial teams are already under pressure from FuelEU administration, reporting deadlines, verifier submissions and the wider burden of environmental regulation.

Against the backdrop of heightened concern in the Strait of Hormuz, it is easy to see how another compliance requirement could slip down the priority list.

But regulatory timelines do not move because the market is dealing with other urgent realities.

And that is where the risk lies. Not in a lack of awareness, but in the fact that a serious and understandable focus on immediate events can leave too little time to prepare for what is coming next.

There is still a tendency in some parts of shipping to treat UK ETS as a smaller, more localised version of EU ETS.

However, that could leave owners, operators and chartering teams very exposed.

There are clear similarities. Carbon pricing is no longer new to shipping and the market has spent the past year adjusting to FuelEU, EU ETS, verifier processes, pooling systems and a steadily growing compliance burden.

But UK ETS is a separate regime, with its own timetable, administration and commercial consequences. It starts in July, which, in practical terms, means now!

The real danger with UK ETS is not that companies have never heard of it but that they think they have plenty of time, or that the hard work has already been done because of the requirements of EU ETS.

At EmissionLink, we are working with clients who required support in preparing for FuelEU and are still waiting to see the full outcome of that experience before UK ETS arrives.

For many owners, the greatest exposure will not lie in emissions reporting itself, but in contracts. Under EU ETS, the market has learned that carbon cost allocation has to be expressly addressed.

Assumptions do not recover costs, contractual wording does. The same will apply to UK ETS, and owners who fail to deal with that may find themselves carrying liabilities they assumed would be passed.

For example, if charterparties have been updated to address EU allowances but say nothing about UK ETS, that is an issue.

If owners are assuming reimbursement will simply follow because the principle has already been established elsewhere, that could prove an expensive miscalculation.

There is also a tendency in shipping to treat environmental compliance as a specialist issue until it becomes a commercial one. This is not only a matter for sustainability teams or compliance managers, but also for chartering desks, legal teams, owners, operators and anyone responsible for voyage economics.

The danger for everyone involved now is delaying the process and assuming existing systems, assumptions and contractual protections will somehow be enough.

As hard as it may be to contemplate, the smarter course is to act now, clarify the exposure, review the contracts and make sure the right advice and systems are in place before the deadline arrives.