UK emissions trading scheme extends to domestic shipping

The UK is requiring 100% coverage of carbon dioxide, methane and nitrous oxide for domestic operations and will require 50% of emissions to be recorded and covered on international routes when the scheme expands.

Shipowners and operators must report emissions by 31 March of each year following the prior reporting period. The initial surrender deadline for companies to turn in their carbon allowances is set for 30 April 2028 for emissions from the 2026 and 2027 reporting periods. 

A vessel’s registered owner maintains responsibility for emissions reporting and allowance surrender unless the owner delegates the responsibility to an International Safety Management (ISM) company through a legally binding written agreement covering ship operations, ISM Code compliance and UK ETS obligations. 

The UK government’s Environment Agency (EA) has developed technical guidance for owners and operators on how to comply with the scheme. 

The UK has said it will ’dynamically align’ its own UK ETS with the European Union’s EU ETS carbon market and said negotiations are ongoing around creation of a formal agreement with the EU on the matter. 

In mid-March 2023, the UK’s European Affairs Committee issued a call for evidence as part of its inquiry into dynamic alignment.

UK Chamber of Shipping says challenges remain in ETS policy

The UK’s Chamber of Shipping lobby group said the ETS carbon market’s policy package for maritime has ’continued challenges’ including associated costs to communities that rely heavily on intra-UK passenger and cargo shipping services and what the lobby group views as not enough reinvestment of revenue from the scheme back into decarbonising the maritime sector.

"Alongside the specific impacts for island communities, and our calls for lifeline services to be exempted from the scheme, we also explored the challenges of implementation and our calls for greater investment and revenue recycling to support meaningful decarbonisation projects and the need for the UK to champion a global framework to reach net zero," the lobby group said.

In March 2025, the UK government committed the UK shipping sector to reach a net-zero emissions target by 2050, and to hit interim emissions-reduction targets of 30% by 2030 and 80% by 2040. These emissions targets are in line with the upper end of the ambition statements that form IMO’s emissions-reduction targets in the most recent update to its greenhouse gas reduction strategy, agreed in 2023.

At the time, the UK’s plan consisted of a combination of the targets along with promises of further investments in fuels and technologies to decarbonise shipping and an expansion of the UK ETS to shipping.

In February 2026, the UK Chamber of Shipping raised what it said were "broad-reaching concerns" over UK’s inclusion of maritime trades in its ETS market.

The organisation said at the time that the UK shipping sector "cannot deliver meaningful emissions reduction without the necessary fuels, infrastructure and clear guidance in place".

"Premature implementation risks higher costs for passengers and freight, with limited environmental gain," it claimed.