Boost Your Shipping Efficiency with Digital Signature Legitimacy in the European Union

How to eSign a document: digital signature legitimacy for Shipping in European Union

remark we will be uh recording this uh this session um so if that's not acceptable for you then this would be the unfortunate time to leave so hopefully everybody stays uh and then we can uh can formally kick it off thanks for joining our clients relations and colleagues uh and uh that you're here in our webinar my name is Aon V I'm a partner in the text practice of PWC the Netherlands and responsible for the PWC Nel transportation and Logistics team and together with my colleague Jan marelis I focus on the maritime sector and in that light would like to welcome you to our webinar on the EU uh and it's consequences for especially the global Maritime industry uh most of you will have heard of the EU ETS which is and will soon be impacting many Industries and hence also us um and therefore we've taken the initiative to inform you and update you on the EU ETS especially in relation to the maritime sector um and together with our EU ETS expert colleagues of PWC Netherlands uh who jointly form our EU green Dew Excellence Center uh We've prepared a presentation for you they will take you along the recent developments and most important aspects of the expansion of the EU ETS to the maritime industry um and with that I would therefore to hand it over to my colleagues Julet par Mohammad asak and Jonathan Banks who will demonstrate the significant impact of the EVS on the maritime industry to you um we really hope you enjoy the session and that it provides you with valuable insights please do not hesitate to drop questions in the chats uh in the chat function we will be discussing these at the end of the presentation so handing it over to Jonathan great thank you thank you very much Owen and good afternoon good morning and welcome everybody before we dive into the webinar itself just a little bit more housekeeping and I'll quickly run through the agenda for today uh so we've started off with an introduction then I'll take you through a little bit of background to the EU emissions trading Sy that's good that was my next piece of housekeeping was please do mute yourselves and turn your camera off just so that we can kind of have a smooth presentation um as I said talk about the EU ETS Maritime so Julia and Muhammad will take you through that we'll have some time for questions so as said please do submit your questions via the chat or Q&A function as we go and we'll try and answer all of those at the end um yeah and then the other note would just be that as Ann said the session is recorded and that the content that we cover today is a general information purposes only and does not constitute or substitute consultation with professional advisers so with that in mind let's jump into a little bit of background to the EU emissions trading system how we find ourselves here today and then some upcoming changes which are going to impact the system more broadly so starting off with the EU green deal now the EU green deal is the eu's ambitious plan to become the first climate neutral continent by 20150 to achieve that there are a series of policies and regulations that have been applied most of that is around carbon pricing and that's what really really focusing on today is the EU emissions trading system so the EU emissions trading system it's existed since 2005 so coming up to nearly 20 years it currently limits physical installations within the European Union and that's about 10,000 of them as well as commercial airlines that fly within the European economic area as a subpart of the existing EU there's also the monitoring reporting and verification or mrv regime and that's actually applied to certain elements of the maritime transport sector since 2018 now as Muhammad will show you this has been expanded so it's going to become relevant to more areas of the maritime industry and will also be expanded in terms of breadth and scope and what's required so in addition to the EU which effectively applies domestic carbon pricing the European Union's also introduced cbam or the carbon border adjustment mechanism now that applied from one October this year and is effectively a carbon border tariff for the importation of emission intense goods and so we've got the EU ETS applying a domestic carbon price and we've got the cam applying a carbon price effectively overseas in addition to those two Cornerstone carbon pricing policies there are a raft of others and there's too many to go into today but just to name a few there are certain plastic taxes subsidies cash grants regulation supporting renewable energy decarbonization extended producer responsibility just to name a few those exist in addition to our carbon pricing policies and then we also have reporting policies so things such as the csrd which you may have heard of or the corporate sustainability reporting directive and that applies to companies to try and increase the amount of transparency and sustainability Target publication so with that in mind that the EU ETS exists within the fame of a whole bunch of policies let's talk about the EU ETS in a bit more detail so as I said it's existed for 20 years now and it applies to fixed installations which is permanent operations within the European Union currently we apply two tests for the EU we look at both the greenhouse gases that are emitted and the industry is in scope so when we talk about greenhouse gases we're looking at carbon dioxide nitrous oxide and per floc carbons and these typically come from electricity or heat generation or intense Industries so we're talking our oil refineries steel works you can see the rest them on the slide there you get the idea of what that's targeting per nitrous oxide and per fluorocarbons it's a little bit more targeted in terms of exactly what industries are in scope but you can see how this has been applied to energy intensive carbon intensive Industries within the European Union the EU ETS is what we refer to as a cap in trade system and so whilst it is a carbon price what that means is that there is a commodity of the EU and that's called an ETS allowance otherwise abbreviated as an eua and that eua equals one ton uh equals the right to emit one ton of CO2 equivalent and so what happens is every year the European Union sets a new amount of euas a new amount of allowances and Emissions that are allowed and that's the and then the EU is the trading platform which exists on top of that now I'll give a very simple example of that trading on the next slide but I also want to introduce the concept of free euas here so as I said an eua grants the right to emit a ton of carbon however there are certain industries which the European Union has thought at risk of carbon leakage now carbon leakage refers to the risk that the industry relocates due to domestic carbon pricing what that means is that the EU commission currently allocates free euas or or free rights to emit to those Industries now that's relevant because as of the next coming years that's one of the key things that are going to change so you can see at the graph on the slide here we've got installation one and installation two installation one receives free euas and that's shown by The Orange Box on the left hand side or the yellow and then they also have verified emissions now in this example their free euas are higher than their verified emissions and so they have an excess amount of euas in any given year now installation one can choose to hold on to those itself or it can trade them it may trade them with installation 2 for example installation 2 has been granted free euas but has more verified emissions than what its euas allow so it has a shortfall it needs to purchase or acquire euas to make up that difference and that is a very simple example of how the trading currently Works under the EU now I appreciate that's quite Broad and you know we're here to talk about the maritime sector so why is this relevant well I'll draw your attention to the graph on the right hand side of the slide we've got two lines there a dark orange line and the yellow line starting with the dark orange line as I said currently sectors have been given free euas by the commission now as cbam that carbon border tariff phases in through from 2026 to 2034 the allocation of free euas phases out as I said cbam is designed to prevent carbon leakage to apply a global carbon price and so the allocation of free euas phases out through till 2034 at the same time we've got the light yellow line there which represents the total amount of euas available it's what we call the linear reduction Factor but really what that means is that in every year from 2024 going forward the total amount of new euas which is the total amount of emissions that are allowed reduces if you follow that path through it means that that by 2039 there will be no new euas allowed again why this is relevant is because euas are the commodity or the mechanism through which the EU works as the maritime industry joins the EU emissions trading system you'll still need to start acquiring euas and you can see there that over the next 10 to 20 years we're going to see a sharp increase in demand as they are no longer being given out for free and a reduction in Supply as the total amount of new euas made available is reduced that's all relevant as the maritime industry enters the system and needs to start acquiring euas for its emissions so with that price pressure in the back of your mind I will now hand over to Muhammad who's going to take you through an introduction to the EU and the monitoring reporting and verification system thank you so much Jonathan uh with that in mind let's indeed discuss uh the ETS uh which is basically the levy uh but first starting with the mrv the monitoring uh reporting and verification regulation if you can jump to the next slide yes so the mrv regime uh is in place as of uh 2018 uh historically it includes uh large ships uh with uh a gross tonage of more than 5,000 which are loading or unloading cargo uh or passengers at ports in the European economic area so not the European Union um and you need to uh monitor um and report on co2 emissions and other relevant information um so to be compliant with the mrv um there are three elements first you need to monitor uh that means that certain greenhouse gases fuel consumption and some other parameters uh like distance traveled time at Sea and so on um uh need to be reported um need to be monitored the second part is the reporting that has to be done on an annual basis each company uh well that owns a ship must provide uh on an annual uh basis um and and their emissions and those emissions must be verified for each ship it operates in the European economic area this has to be done by 30 April uh each year uh for the previous calendar and then the verification as I mentioned and that needs to be done by uh June 30th uh each year uh basically uh verifying that the emissions that you're uh reporting on are actually uh accurate and that's the third party that can do uh that verification for you um from uh January 2024 uh so next year uh you will see that uh some changes will occur to the mrv uh first uh the emissions on which you need to report will be expanded from CO2 um to also me and nitrous oxide uh and as of January 2025 it is uh that the mrv will also be applicable uh to smaller ships um of smaller Tage than the 5,000 tonage so let's jump to the next slide that that gives you a very good over view of what is currently in and what will change so as I mentioned already uh under the current mrv uh cargo ships uh of 5,000 tonage or more are already in scope uh we also see that uh well large passenger transport ships uh like cruises of course are also in scope as of 2025 the mrv will be expanded uh with uh offshore ships also with with a tonage of 5,000 or more uh and for the Eds actually so that is the other mechanism uh that will be the case as of 2027 um and as of uh 2025 uh for the smaller ships the commission has indicated its intention also to include these uh ships in uh the EU ETS but that is something that will be decided later on however uh as for the mrv these ships will also scope as of 2025 on the right side you see uh some other ships for which they've decided some are political choices of course to not uh include that in the scope which are for example uh sailing ships war ships rigs ice breakers but also fishing ships if you can jump to the next slide please yeah so this is actually just an interesting slide to uh show you some ins it on the mrv annual report of 2021 uh this is basically based on a reporting period from 2018 to 2021 as you can see from the graph on the left uh almost 70% of the reported emissions are from container ships o tankers bu carriers uh and some other ships um looking to the um uh picture on the right you can see that actually uh the top 15 countries by gross rate of fright handled in uh main EU ports in 2021 uh it is important to note that well this map shows the top 15 countries there are of course many other countries which are expected um uh for which the ETS Maritime to be relevant for uh think of Latin America um Peru Argentina and Brazil also are in scope uh this could also be relevant for Vietnam Japan Jaan Indonesia Malaysia and India jumping to the next slide thank you uh so the reason we wanted to start with the mrv for maritime is that as you can see from this Slide the EU ETS has and will continue to mirror the mrv in terms OFA trajectory uh therefore uh an understanding of the mrv should help demonstrate where the ETS is heading in the near future future uh and what can be expected as indicated uh by the colored circles where the scope of the mrv has expanded the same changes in the ETS will follow shortly um and uh with with respect to the smaller ships which are included in the mrv as I mentioned as of January 2025 uh it is yet to be seen whether these will also be in scope in the ETS uh but they are looking at it and a decision will be made as of 2026 um I will now hand over to Juliet um and she will talk a little bit about the EU ETS marit time thank you very much Mo and as Mo already clearly said uh yes ETS uh sort of uh dives into what mrv is already doing so what does that mean so what if your ship is in scope for ETS um if your ship is in scope for ETS then the shipping company has to surrender euas for the emission in scope and if you do not comply then that may result in penalties or even the refusal of the uh Port that you are going into uh so it's quite important to make sure that you actually comply with eets so that brings us to what is a shipping company um and I think that's the first thing that's important for you to determine as soon as possible uh so bya the shipping company is the ship owner uh but you can assume if that's sufficiently done in line with the definition in the directive you can assume it to another party such as the Barbo charterer or to the ship manager um and um uh I think one of the challenges at the moment is that uh it's not completely clear based on uh the definition of shipping company whether that is automatically if you have uh assumed the rights sufficiently or if that if this responsibility still needs an additional uh sort of check the box with the emission authorities uh that question has been raised by us with the European commission but we're still awaiting the final answer to that one um so once you know that you are the shipping company uh and that you therefore also have the obligation to comply with eets for the respective ship then the second thing is to understand where you will be allocated to so to which admission Authority you will get assigned uh and from that emission Authority you will also get an operator holding account and the operator holding account is relevant for trading but also for uh complying with EU ETS in principle uh the shipping company uh if it has a legal presence in the EU will report to the emission authority of that uh respective jurisdiction but and that's different for uh shipping companies compared to everybody else that is currently uh subject to ETS if that's not the case if do not have an EU presence then you would look at the most frequent Port of Call over the four preceding years um so with that um uh if you're in scope then you have to report with the respective uh emission Authority before April 1st of 2024 in the respective year so in this case we're talking about 2024 a monitoring plan to show to the authorities how you will monitor your uh emissions for for 2024 this has to be approved by the emission authorities and then uh once the year is done you also have to uh get a verified emission report and that you also have to submit with the authorities uh and uh based on that they know how how much emissions you actually emitted with respect to the monitoring plan um that's already due April coming year um and the expectation is that the L ation of the respective authorities uh so respective emission authorities will only be finalized in February so that's also a little bit of the challenge with EU for the shipping industry right now is because it's uh it's going to be there as per one January of 2024 but a lot of things are not uh clear at the moment yet and for example the assignment uh of the relevant shipping companies will only take place uh almost two months later so it means that you have very short window to to submit your monitoring plan um then once you have a verified emissions report then you also have to surrender the respective allowances that are due that year H and that has to be done before September 2025 with respect to the emissions of 2024 for the EU uh eua acquisition uh there will be a phase in so uh ships will not be directly um um required to submit surrender euas for the full amount of emissions in scope but for 2024 it will be 40% for 2025 it will be 70% and for 2026 it will be completely phased in and then it will be 100% another important element for uh EU ETS is that voyages that only have one EU Port so that for example go from the US into an EU Port are only in scope for 50% of the voyage um then a couple of things that we would like to point out that you have watch have to watch out for is that if you have a shipping company that is in scope of based on historical data of mrv and even if you don't have any EU voyages for 20124 you still have a reporting obligation the only thing is that the reporting obligation might be that you do not have any emissions but you still have to report on it and then uh also uh as al already mentioned briefly the definition of shipping company is uncertain for certain situations so the default position is the shipping company is the company with the legal ownership however if it's properly um um um assumed if the responsibility is properly assumed then it can also be the Bebo charterer or the ship manager um in that respect I think it's good if we go to the next slide and have a few examples on what Shipping Company exactly means so uh the first example is a most straightforward example so in this case the ship owner is also the one that is actually uh um doing all the Voyages and there's no ship manager or ship charger in place so in this case the ship owner is for example a Hong Kong entity uh which means it doesn't have a a presence in the EU uh and their most frequent Port of Call is uh is the Netherlands in that case they will get assigned to the Dutch emission authorities and they will get operator holding account in the Netherlands similar uh type of example is with respect to Bermuda this case in our example the most frequent Port of Call is Greece if the ship owner is a Spanish company then it's not relevant what the most frequent Port of Call is because then you have an EU presence and then in principle you're allocated to to Spain what is relevant for you as an organization is especially if you have multiple ships in multiple entities is to determine if um if there is a consistency in it and if you are very shattered then it does make sense to see if you can reach out to the emission authorities and ask if if there is some sort of option to bundle it and make sure that you reduce the uh yeah the the number of authorities that you have to comply to uh but these are the the general rules then the second example is with a ship manager so with respect to the ship manager uh you can assume the responsibility so let's say the uh responsibility is sufficiently assumed in line with the definition of shipping company in that case the ship manager of the uh ship that is owned by this Hong Kong entity again is the shipping company and it also means that the ship manager is the one that gets assigned to an emission Authority and gets the operator holding account this ship is again the ship that has the most frequent Port of Call in the Netherlands so in that case you will get an operator holding account at the Dutch emission authorities then you can also have a ship manager uh but you don't have a um have responsibilities properly assigned so they perform certain services but it's not in line with the definition so in that case the default is the ship owner is the um is the one that is considered the shipping company the ship owner here in this example is in Spain uh and then you also will have a operator holding account in Spain then the Third example is the ship charger so in this case we again have the Hong Kong ship owner and we have a Barbo charger with Malaysia um and the responsibilities are fully assumed um so to the ship Charter and that means that in that case the ship charger is the shipping company under the um under the directive uh and it also means that it's the ship company that has to register and comply uh and it gets a operator holding account again in the Netherlands if the shipping o if the ship owner is a Bermuda entity uh but it is for example a time charterer um then uh it will remain with ship owner again that's the default and it will not transfer because it has not sufficiently assumed uh the regulatory the regulatory obligations and then um it is the Bermuda entity that still has to comply with EU the Bermuda had most frequent Port of goal in Greece so you get assigned to Greece and then it doesn't matter that the ship charger is in Malaysia then I think we can go to the next slide so how does it then work for trading for shipping companies so Jonathan already briefly explained how the cap and trade system works ship uh shipping companies don't get any free allowances uh so that's zero so they have a uh uh emissions in scope and they have to get EAS for the full amount that is in scope they can acquire those EAS in in multiple ways uh one is via a company uh that has free allowances so has an access of euas uh that's an option but also taking into account how the ETS Market will develop this is probably an option for the coming years but it's not an option for the longer term and then the remainder of the euas will be uh trade it via an auction via the eex uh or you can acquire it uh via a Trader that will likely also buy them at the E so that's how you will be able to get your euas then if we can go to a numerical example uh so the European commission reported that in 2021 there were 11,800 chips that submitted an emission report under the mrv regulation that Mohammad talks about and that accounted in total for 124 uh 24 .3 million tons of CO2 so that's quite a lot um and if you then look into let's so let's assume that for 2024 the emissions uh will be the same then um you will have the situation that 40% of those emissions are in scope uh and of that we know that about 2/3 is uh of voyages with only one EU ports so in that case uh we would end up with uh emissions of and I have to look at my notes here to cheat a little bit um but that would mean that we have emissions in scope of uh 32 million uh tons of emissions and let's say that next year the price of one eua is1 that means that the Dutch that the European Union will get 3.2 billion EUR uh based off uh ET TS uh Maritime um if we then go down and drill this down to ship level uh so if we assume that uh a ship has 10,525 uh tons of CO2 per enm uh that's the divided the the the emissions in total divided by the number of ships and let's say that it's completely phased in so we're talking in this example about 2026 and let's say by then the price Rose to €130 then that would mean that your ship if it's completely covered uh by ETS has to pay one point almost 1.4 million EUR in ETS uh allowances so euas and if it's only partially in scope then uh that will be 50% uh of of it um but like you can see we're talking about quite significant numbers and what the uh picture on the right hand side also shows is that it really matters how efficient ly you are so if you're more efficient then that can have an impact of 300 almost €350,000 um uh compared to to the Baseline in this case so it is really an incentive to also decarbonize and and have less emissions and it's also very important to consider what this price impact will be uh uh because it it will e away your margins quite quickly um so with that uh I think oh yeah maybe to one step back uh I think for 2026 if we take those same numbers into account and assuming that's fully phased in then uh the European commission will get about 10 billion euros from from ETS so that also quickly Rises um and uh I think from there we can go to uh to the next slide so then EU manage eua management so how does it then exactly work so if you are a shipping company then the shipping company gets assigned a uh an operator holding account so this will happen only in February because that's when you get assigned to an emission Authority in 2024 uh and before that um you don't have an operator holding account as a ship uh Shipping Company operator holding accounts can be used for trading and they can be used to surrender uh the euas for compliance obligations um and in that respect it's different to a trading account because you also have trading accounts these can be opened in principle by anybody uh and the trading accounts uh as as long as you meet certain conditions but the trading accounts can only be used for trading one of the benefits of a trading account is that you can trade slightly quicker um so because the eua is of course a live floating Market uh it can be interesting to have a trading account uh to avoid those price RIS risks uh but uh if you are a shipping company you will get an account assigned that you uh can use for trading as well uh what we do see in the market is that parties are already considering setting up a trading account uh and that's important uh because they already want to acquire those euas and uh some also expect quite a bit of a increase in eua price in the coming uh weeks and months uh because of this whole Mar time sector being added to the ETS system um then uh a few other things that need to be considered from a financial perspective with respect to euas euas can attract vat depending on the location and the entity making the acquisition uh transfer pricing principles uh need to be considered um so for example if you have one group entity uh doing all the trading and you then have to transfer them from that entity to the respective entity that needs to comply so to the shipping company within your group that can trigger certain U uh tax implications uh because of from a transfer pricing perspective you have to report an arms length remuneration for the transfer um and that can also trigger unwanted capital gains or exchange Gams uh gains depending on how uh they are exactly traded then also from a commercial perspective it's very relevant to consider the eua acquisition so think about chartering who is responsible those are all elements that you want to take into account from a contractual uh perspective and bimco is currently working standard Clauses for ETS uh with respect to the the the contracts so those will uh be U expected to be available uh shortly but I know that it's taking a little bit of time um and then uh due to the timing uh difference uh between EAS when they're Acquired and when they're surrendered you can also consider the uh yeah managing that risk so first of all understanding who Bears the risk and also uh potentially hedging the risk um so those are also things you can consider uh also depending on the risk appetite of your organization and then lastly uh accounting so the accounting treatment uh really depends and and there's uh still a lot of uncertainty in that regard uh so if we can go maybe to the next slide yeah so um ETS has been out there quite a while as Jonathan said so since 2005 there is a demand from the market to get more uh clearance from an accountant perspective but it's not there yet uh there was if 3 that gave some guidance but that was then withdrawn so that guidance is still not there uh and you can have different ways on how certain things are uh recognized so for example it could potentially be recognized as inventory it could be recognized as an intangible asset or in certain matters it could be um recognized as a financial instrument and that can have certain implications for for your financial statements um and with it everything that flows from that so it's important to consider that as well and it also depends a bit on how you utilize these euas so from there I think we can go to the next slide so some other relevant considerations uh one of the things to really consider is that data is key uh so you have a lot of things that you need to report upon and as Muhammad also already pointed out there's also a lot of new players uh that are going to be reporting under mrv and you have to report more things under mrv so you can consider for example the nitrous oxide and methane that has to be reported uh and that's that's quite important to to make sure that you have that information uh but it also becomes more relevant between parties on what kind of fuel is used and and did you really try your utmost uh to go to the lowest emissions as possible especially if you are the one bearing the risk of uh the financial risk of the euas um it's also important to start collecting and and making sure that your systems are in place for this uh properly as soon as possible uh and also the collection of EAS is critical start with that on time technically you can buy them just before September uh but there's a chance that they are um either very expensive by then and plus the other thing is that there might not be enough EAS available at that moment in time VI the auctioning or via other players to uh uh to acquire and if you do not get enough EAS then that can potentially result in penalties then second thing I think is very relevant to consider is what would happen is is because what we're talking about right now is very shortterm so how do you comply what do you need to do but the other thing that's very relevant because we're talking about quite significant amounts here in total but also per ship is that shipping companies consider how to reduce their emissions going forward uh and that there's a big incentives to decarbonize as as quickly as possible first of all I think you need to do it to stay relevant if you do it quicker than your competitors then there might actually be an advantage there for you uh but if you don't do it then I think these cost which in principle will be pushed uh through the value chain as much as possible might be stuck at your level so I think it's very important to consider this and to really build a plan for the future to decarbonize and to create operational change and I think this is one of the things that PWC is positioned really well in helping you develop those kind of PL plans and to really help you develop uh a long-term sustainability plan uh on how to get there um on the one hand you have the uh the the stick uh which is ETS so the fact that you have to pay on the other hand you also have subsidies and subsidies and incentives that need to be taken into account um so I think one of the things to consider is a better utilization of ammonia hydrogen biofuels and other low carbon fuel options uh and potentially also CCS although that does have to meet certain criterias in the etss directive um but you have to look at that and and also look at the opportunities that are there from a subsidy perspective and uh also there PWC can really help you to determine which jurisdiction are you located what are the local subsidies what are the EU related subsidies and help you with that to decarbonize your your Fleet and also help you bridge the gap between the newer available uh um technologies that have lower carbon emissions but that are currently maybe more costly uh but with that come to a good overall project and investment opportunity and then the last thing is the verification of the emissions um that's also very important so it makes sense to uh I think for the parties in scope for 2024 the most likely already have V fires but for the ships in scope as for 2025 so think about the 400 uh gross Stone uh to 5,000 gross Stone ships make sure that you also have uh the um the uh a right verifier in place that can help you with this so with that I think I'll sorry yeah then tooling uh ATC we're also working on tooling we already had a an tool for um emissions insights for ETS in general and we're now building a tool that also gives insights on um on the financial impact for your Fleet uh also considering potential options for subsidies um uh and that's currently under construction so uh feel free to reach out see how we can support but also we would like to get your input on what you would like to see there so that it tailors uh our client needs as well then I think with that I'll hand over to Jonathan who will do a brief uh key takeaways excellent thank you very much Muhammad and Juliet um just before we dive into the key takeaways just a reminder please do submit any questions you have through either the chat function or the Q&A function um we're making good time so we're very keen to hear kind of what the burning questions are from your perspective if there's anything that's not clear or that you'd like to hear a discussion on please do drop them through the chat all are welcome in terms of the key takeaways um we want to leave you with three things today or four if you include the reminder the reminder being that the EU applies to the Mar Maritime transport sector in less than 6 weeks so today is the 16th of November so it applies very soon before the 1 of January 2024 So within those next six weeks there are a few things that you can do you can look at your Fleet and determine which ships are in scope and who you think the shipping company would be for each of those ships you can have a look at who is likely to Bear the financial responsibility for the EU and whether that's the eua acquisition itself bya the shipping company or if it's a cash payment you can look at which jurisdiction you're likely to have the shipping company allocated to if you don't have a legal presence within the European Union and you can also do a sort of high level quantification of the financial impact in what you expect so if you can do all that before the 1st of January you can enter into the E with a relatively good understanding of what this might mean for you your Fleet and your organization and that can also equip you quite well to engage with authorities whether it's the competent Authority that you've been assigned all relevant counterparties so there's quite a bit that can be done today with that in mind we encourage you to be proactive as was said by Muhammad a lot of the ships which are in scope of the uh mrv they will already be reporting a lot of this information and so there should be a baseline process for those larger vessels already in place noting that of course the mrv will expand to include other greenhouse gases and other ships and just don't forget that the EU is actually a directive and so for those who aren't familiar in the EU we have a regulation and a directive a directive what that means is that it does require local implementation and so whilst the directive is published and it is should be fairly standard it may be tweaked slightly for each jurisdiction when it gets entered into their national law and so that's something to keep a very close eye on in the next few weeks so with that in mind we will now go to the question section so as I said please feel free to submit them either via the chat or the Q&A function um I've got a few here so Muhammad I might start with you and this question question is on scope so do we think that car fery operators are in scope oh might be on mute Mohammad Jonathan thanks what are car faers I think we can assume they're probably ropack ships so roll on roll off passenger ships um those are in scope right so if they meet that uh 5,000 Tage minimum then they should be in score yep fully agree and then it also might be worth mentioning that even if they're under that gross tagee they might be in mrv from 2005 2025 sorry 2025 yeah exactly um we've got another question here and Juliet I'll pass this to you but also and Keen to see whether you have any insights on this what would be the incentive for a ship manager to assume responsibility maybe Juliet I'll go to you first yeah um so what we do see is that some companies have a multitude of ships and then uh those ships are uh managed by one ship manager uh and uh if you have a ship manager that that uh takes care of all these ships and you make that ship manager the shipping company then at least the one that knows all the data and is responsible for reporting on that is also the one that uh has the compliance obligation under ETS so from there it makes sense to consider if this is the way that you do business to also um make sure that your ship manager is the one that is the shipping company because otherwise you start transferring uh uh you potentially start transferring euas within the group H and with that I'll hand it over to Arn who can explain why that is potentially not the best idea I I think you're now pointing to tax consequences as well but I think from a business perspective if you as a ship manager have all the data uh and it's very efficient to then be reporting it and you might be even charging the ship owner a fee for it uh for the administrative work because of course the ship manager doesn't necessarily have to be an entity that is part of the same group uh it could be somebody else as well and indeed if it's within the group um shifting either responsibilities or not let's say remunerating for activities might have a tax impact and so I think from an incentive point of view yeah if if from a commercial Arrangement you would be able to charge for it that that's always something that you could do and perhaps even within the group it's something that you should do for tax purposes so and maybe sticking on that theme of tax purposes there's a great question here from Daniel um which maybe Juliet I'll pose to you how do the EA countries fit into this and then the second part of that question is does legal presence only apply to corporate residency or is it also a tax residency yeah so maybe start off with the first one so uh the EA countries uh are also part of the ETS system and then you also have Switzerland that is also uh has an ETS system that is to a certain extent linked to the ETS system uh of the European Union or the EA countries so from an EA perspective they will also be in scope for the maritime sector so for example Norway will be in as well uh but um uh um uh there are other jurisdictions so think about for example the UK that have an ETS system but that's not automatically linked because the UK has not made that decision yet or the European Union and the UK have not made that decision yet so there are different systems for but for EA countries uh this is also applicable and then with respect to Legal presence only or corporate residency uh so corporate residency or tax residency my understanding of the current reading of the directive is that it refers to Legal presence and not NE Neary to tax residency um but yeah because that that's a different term and and this is not uh defined in that manner in the directive uh but um uh yeah I think that's that's where it currently stands but there's also like I said still some uncertainty how certain things should be uh explained in practice yeah I I think on that shilad what you could also have of course is that we have a shipping company that is uh sitting abroad so not in the European Union uh but has ships that do a Voyage to the European Union and uh what what what you could do in that case is that you uh could register that foreign um company uh in in the European Union in the specific country uh with the Dutch Chamber of Commerce or with any other Chamber of Commerce uh for example to open a trading account so uh in that specific case I'm not talking about the account holder account but for example for the trading account uh you can have uh that registration to be done with uh well the local Chamber of Commerce uh and then basically you are registering the foreign entity without having actual presence uh well in in in Europe which is not required um so so so that is also something that well that that is uh put in place in the in the ETS legislation yeah and I think maybe to tie into that Mohammad um that is something that we are indeed helping clients with um so one of the things is that you can indeed register at the Chamber of Commerce what we do see the challenge to be especially if we talk about trading accounts is that uh if you want to open a trading account the emission authorities also require you to have an EU bank account and non EU companies uh quite often do not have an EU bank account um opening an EU bank account is uh technically possible uh but in practice quite often takes a while uh so we also have alternative uh Alternatives there that we discuss with our clients on how to uh uh speed up that process and and uh have certain services in place that help you provide that bank account without creating an actual uh legal presence for your company in the EU or without creating a taxable presence in the EU but for that if that's something of Interest please reach out because we're happy to talk about that in more detail with you and and that last part Juliet I think that raises a really interesting observation in terms of the EU isn't just a question for the operations team or the shipping Logistics team right it's a question for the finance team it's a question for the tax team and you really do need to bring sort of a coordinated effort to this otherwise take that example of the registration of a training account you can have sort of funky or adverse outcomes popping up here and there yeah no totally agree Jonathan uh good point I think also because I also mentioned that these cost will likely be pushed to the through the whole value chain I think uh this is uh in principle relevant for the maritime sector because they are confronted with all the all these cost and the compliance obligations but in the longer term it's it's important for the entire value chain because most of these costs will be pushed through make the cost of transport higher and with that the cost of goods increase so it's not only relevant for the maritime sector as such it's relevant for everybody that ships cargo or passengers uh and does that uh with larger ships um and as we saw in the picture that Mohamed showed uh there is quite a lot of that going on globally indeed and we've probably got a time for maybe two or three more questions so please if you have anything burning do send them through to us but I've got one here uh maybe Muhammad I'll pass this to you in the first instance and so what happens if I have a ship owned by a EU legal entity but the ship itself never enters the Waters of the European Union um let me see uh sorry can you repeat the question Jonathan yeah so this is looking at WEA so if I've got a ship that's owned by a European company but it's never enters the Waters of the European Union I think the question here is how what is a voyage how is that defined and and is it the Voyages or is it the ownership that brings you in scope well it's basically the Voyages of course so so if you do not have any voyages uh at the European territory then you are out of scope for the EU ETS yeah or be it you may be owned by an EU legal entity exactly yeah I see also another question in the chat I think that's about uh the incentive so what would be the incentive for ship managers to assume uh responsibility not sure if you've already touched based on that but I think oh we did indeed yeah because that's more from a practical point of view indeed rather than having each separate ship owner to uh well register themselves separately um as perhaps also an interesting one that's more on the subsidies because of course we're now talking about the ETS which is more on the uh cost so the pain um there are indeed quite some subsidies and we see uh quite some developments in the shipping sector for example going to metin ccs uh but an important element there is that those subsidies are applicable to you but only if those ships are basically uh on the balance sheet of a company that is actually uh located in the EU so that is something to bear in mind yeah thanks Mohammad and maybe with the last question I'll I'll throw to Juliet and this is a bit of a broad one to close us out so we've spoken a lot today around various different issues and other than just talking about it and obviously we had the tooling example earlier what can Peter C do to assist with the eats and the MV yeah so I think what we can do on the short term is really help you defer define whether you're the shipping company who has what compliance obligations what kind of costs are related for your company in the short and longer term future uh but I think uh as also highlighted during the presentation itself I think one of the other key things and I think that's where PWC is positioned really well is that we can help you with the longer term vision like help you how to decarbonize to see what kind of opportunities are out there how to utilize subsidies and incentives and really help you build a plan to uh decarbonize and to Fleet great thank you Julia and I think with that I'll hand back over to win to uh wrap us up and close us out sure um well thank you everybody for uh for joining our webinar um I hope it has provided the valuable insight sites that I mentioned in the beginning of the presentation um it is clear also based on the key takeaways and the presentation this is going to happen in six weeks time and so if you have these vessels or if your clients have these vessels that are in scope you will be impacted and it's really time to act now um so hopefully we've made that clear should there be any other questions or remarks or in case you would like to discuss feel free to reach out to one of the presenters or to to myself um and um yeah with that wishing you a very good day and thanks again for joining perhaps see you next time byebye thank you very [Music] much