ANALYSIS: Shipping's Jump in EU-ETS Costs Will Offset Bunker-Price Decline in 2026

• EU-ETS compliance costs for VLSFO may jump by 72.6% this year
• 1 mt of intra-EU VLSFO consumption will generate $319.30 of EU-ETS compliance costs
• EUA prices are rising, EU-ETS phasing-in has reached its final stage, emissions factors are changing and the dollar has weakened against the euro
• This compliance cost increase will largely offset the expected bunker-price drop in 2026

The EUA price rose steadily for most of 2025. Image Credit: Ship & Bunker

The shipping industry is facing another steep rise in the cost to comply with the EU's emissions trading system (EU-ETS) in 2026, and for some ships GHG compliance costs may almost outweigh the cost of their fuel.

This year the EU-ETS reaches its final stage of phasing-in. Shipping has been gradually pulled in to the regulation, starting with only paying for 40% of its eventual costs for 2024, moving up to 70% in 2025 and finally reaching 100% from 2026 onwards.

The regulation affects ships over 5,000 GT in size on voyages touching EU ports, requiring them to purchase European Union Allowances (EUAs) to cover the GHG emissions generated during their travel and surrender them by the September after the reporting year. Ships on voyages between the EU and elsewhere have their EUA requirement halved.

On top of the phasing-in, 2026 will also see a change in which GHG emissions are counted, with methane and nitrous oxide emissions included in the calculations for the first time and adding to the EUA requirement. 

Beyond that, the EUA price rose significantly through the course of 2025 and appears set for further increases this year.

The confluence of these three factors means shipping may be in for an increase of as much as 72.6% in EU-ETS costs per tonne of VLSFO consumption in 2026 compared to the previous year, according to Ship & Bunker analysis.

Counting the Cost

Image Credit: Ship & Bunker

Calculating the increase in EU-ETS compliance costs this year requires a look at EUA price expectations for 2026, and then taking into account the change in emissions factors used and the phasing-in of the regulation.

The latest information from environmental market specialist Grey Epoch Europe* indicates the EUA price may average €86/mtCO2e ($99.78/mtCO2e) in 2026. In USD terms this is up by 18.9% from the $83.89/mtCO2e paid on average in 2025.

Adding methane and nitrous oxide to emissions factors used for EU-ETS calculations will mean more EUAs will need to be purchased per tonne of bunker consumption. A GHG emission factor of 3.2mtCO2e per tonne of VLSFO will be used in 2026, up from 3.151 in 2025. 

For HSFO, the emission factor will rise to 3.163 from 3.114 previously, and for MGO it will rise to 3.255 from 3.206 previously.

For VLSFO, this change alone will add 1.6% to compliance costs this year.

Finally, the full phasing-in of the regulation for shipping will mean companies need to buy 100% of their EUA requirement for this year, up from 70% in 2025 and 40% in 2024. This amounts to a 42.9% increase in costs between 2025 and 2026.

Taking all of this into account, one metric tonne of VLSFO consumption on an intra-EU voyage can expect to generate $319.30 of EU-ETS compliance costs in 2026, up from $185.04 in 2025 and $90.67 in 2024.

How Does This Compare to European Bunker Prices?

Any analysis of marine energy costs in Europe now needs to take in both the GHG compliance cost and the underlying bunker price.

Bunker prices are forecast to drop significantly this year on the back of an expected surplus in crude supply from OPEC+ member states amid shaky global economic growth, meaning much of the expected increase in EU-ETS costs will be offset by lower bunker costs.

Ship & Bunker's latest price forecast estimates the Rotterdam VLSFO price to average at $370/mt in 2026, with HSFO at $327/mt and MGO at $489/mt. These are down by 22.4%, 22.3% and 26.2% respectively from the average prices of $476.50/mt, $421/mt and $662.50/mt seen in 2025.

EU-ETS compliance is expected to cost $319.30 for every tonne of VLSFO consumption in 2026, $315.60 for HSFO and $324.78 for MGO, up from $185.04, $182.86 and $188.27 respectively in 2025. 

This means bunker buyers at Rotterdam can expect a combined bunker and EU-ETS cost of $689.30/mt for VLSFO in 2026, $642.60/mt for HSFO and $813.78/mt for MGO. The total cost for VLSFO is up by 4.2% on the year, HSFO up by 6.4% and MGO down by 4.4%.

Other Factors to Consider

With EU-ETS compliance now almost equalling bunkers as a cost for some voyages, shipping companies would be well advised to pay attention to what seasoned watchers of the carbon markets are saying about the EUA price.

One particular area of interest at the end of 2025 was an apparent disconnect between EUA prices and European gas - two markets that are normally closely correlated. 

"The link between gas and EUA prices is virtually non-existent at the moment," hedging firm GRM said in a note to clients last month.

Historically the two have been correlated because higher gas prices make coal more economically viable for power generation, especially as coal prices have declined relative to gas. As more coal is used – requiring more allowances – EUA demand rises in tandem.

But this link has weakened significantly over the past year, with the EUA price rising throughout most of 2025 despite gas prices dropping. This reflects partly an increased focus in the EUA market on potential future shortages, as fewer of the allowances are issued as the years pass to encourage decarbonisation, and partly the steadily declining role of fossil fuels in European power generation. 

*Grey Epoch Europe Limited is an appointed representative of Thornbridge Investment Management LLP, which is authorised and regulated by the Financial Conduct Authority.