The UK maritime ETS and market distortions

The UK Maritime Emissions Trading System (ETS) is the extension of the UK ETS Scheme to domestic maritime emissions from 1 July 2026, covering ships of more than 5,000 gross tonnes on domestic UK voyages, and all in‑port emissions. It mirrors the European Union’s ETS structure but is not yet linked to the EU system.

The UK Government intends to include a share of international maritime emissions in the UK ETS, but not before 2027 or 2028 and this extension of the UK maritime ETS is subject to negotiations as set out in the UK-EU Summit Common Understanding – and appears therefore to be part of an on-going negotiation with the EU. This is because the existing UK ETS provides an incentive to call at a British port before calling at a port on the continental mainland, thereby leading a market distortion.

The other market impact is between modes of transport for domestic movements of goods because coastwise movements of goods, such as feeder containers, oil products and aggregates are subject to additional costs under the ETS that are not being applied to road and rail. 

In addition, the UK’s Chancellor for the Exchequer has responded to the spectre of additional inflation in the economy as a result of the war in the Gulf by continuing a freeze of Fuel Duty for road hauliers, with the temporary 5p cut extended to the end of 2026. Hauliers have also received a 12‑month Vehicle Excise Duty (VED) holiday, paying only £1 at renewal — a saving of £600 per annum for a typical HGV and £912 for the largest vehicles. Red diesel duty was also cut by over a third, to its lowest rate in more than 20 years, until the end of 2026 — benefiting rail freight operators.

These more or less simultaneous changes in favour of road haulage and rail freight and to the disadvantage of coastal shipping are likely to have an impact on the modal split for domestic freight, with the main losers being some shipping lines and ports which would otherwise handle the maritime traffic.