World News
UK-ETS to Add 12.3% to Fuel Bill for Domestic UK Shipping
This week the UK is set to become the latest jurisdiction to join the club of those charging shipping for its GHG emissions.
As of July 1, the UK will require ships over 5,000 GT on domestic voyages between UK ports to purchase UK allowances (UKAs) to cover 100% of the tank-to-wake CO2, CH4 and N2O emissions generated on each voyage.
The first surrender deadline, for emissions from the 2026 and 2027 reporting years, will come on April 30, 2028. The deadline for reporting is the March 31 following each reporting year.
The UK-ETS system is similar in function to the EU-ETS, and the UK government is in the process of reviewing the regulation to align it with the EU's system over time.
The most important part of this alignment process is that the government at present plans to extend it to cover international voyages from 2028. The British government expects to raise £75 million from this international voyage addition in 2028, rising to £290 million in 2029.
How Much Will it Cost?
While UKAs and EUAs are similar in function, with each allowance covering 1 mt of CO2 equivalent emissions, they differ significantly in price.
In dollar terms the ICE December 2026 UKA futures contract has traded at an average of about $70/mtCO2e so far this year, 21.8% less than the equivalent EUA contract.
Taking Rotterdam VLSFO as a proxy for UK bunker prices, this would add 12.3% on average to the cost of bunker fuel alone so far this year.
But with the British government set in its plans to align with the EU, the UKA price is likely to rise over time to converge with EUA prices.
This likely convergence of prices means it will be a good idea for those with a firm idea of their UKA requirement to start buying early, according to global marine fuels firm KPI OceanConnect.
"I think it’s always a good idea to think ahead," Jesper Sørensen, global head of alternative fuels and carbon markets at KPI OceanConnect, told Ship & Bunker.
"If you have a firm idea of what your requirements are, I don’t see any reason to delay this decision.
"I don’t think there is a large risk in doing so, in terms of the prices suddenly dropping, so you might as well go in and secure your requirements early, if you know what you need.
"We will be able to offer UKAs in a similar way that we are offering EUAs, so we are following it and we are ready."
Key Bunker Prices More
| VLSFO | MGO | |||
|---|---|---|---|---|
| $/mt | +/- | $/mt | +/- | |
| Singapore | 854.00 | 11.50 | 1278.50 | 11.00 |
| Rotterdam | 681.00 | 5.50 | 1400.00 | 10.00 |
| Houston | 725.50 | 15.00 | 1364.50 | 23.50 |
| Fujairah | 944.50 | 19.00 | 1675.50 | 9.00 |
| Global 20 Ports Average | 860.50 | 15.50 | 1522.00 | 1.50 |
| Global 4 Ports Average | 801.00 | 13.00 | 1429.50 | 4.00 |
| Global Average Bunker Price | 922.00 | 13.00 | 1596.50 | 2.50 |
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