The financial burden of the EU Emissions Trading System (EU ETS) may land squarely on shipping companies, but their ability to recover those costs from charterers can break down at several stages within a charter chain, according to a new analysis reported by Ship & Bunker.
The report, authored by maritime operations analyst Hugo Federico Hernandez Varela—an independent expert with more than 25 years of experience in cargo, port, and ship agency operations—identifies four distinct points where recovery efforts can falter, even though EU regulation designates the shipping company as responsible for surrendering emissions allowances.
Four Points of Failure
According to Ship & Bunker, Hernandez Varela explains that regulators can assign cost responsibility to one party while granting recovery rights to another, but whether that recovery mechanism actually functions depends on separate contractual arrangements the regulator does not control.
The first weak point, as described in the analysis, involves head charters lacking any ETS reimbursement clause altogether. Hernandez Varela notes that many active fixtures were negotiated before the EU ETS reached full scope, leaving them without provisions for this evolving cost.
The second issue arises when a reimbursement clause exists in the head charter but isn’t replicated in the sub-fixture. This scenario, the analysis states, leaves the intermediate party absorbing costs it has no mechanism to pass further down the chain.
The third breaking point concerns differing governing law across charters within the same chain, which Ship & Bunker reports can result in ETS recovery rights being interpreted or limited differently depending on jurisdiction.
The fourth involves mismatched dispute resolution forums. Hernandez Varela is quoted as saying that having “London arbitration in one link and a different jurisdiction clause in the next means recovery cannot be run as a single connected action down the chain.”
Building on Prior Research
According to Ship & Bunker, this analysis extends findings from an earlier Erasmus School of Law study, which the outlet covered in July. That research concluded that the statutory reimbursement right embedded in the EU ETS Directive functions as something close to a “paper tiger” in real-world application, with actual recovery depending heavily on specific charterparty language.
What has changed for 2026, per the report, is the scale of costs now flowing through these vulnerable contractual chains. Ship & Bunker states that full phase-in has pushed the covered amount to 100% of emissions, with methane and nitrous oxide now included as well—even as the underlying contract structures remain unreinforced. Hernandez Varela is reported to have summarized the situation by stating that while the obligation now arrives in full, “the right still has contracts to cross.”
Does This Matter to You?
For those managing charter agreements, bunker cost allocation, or voyage fixtures involving EU emissions exposure, this analysis highlights a contractual risk that exists independently of regulatory compliance itself. According to the source material, parties relying on statutory reimbursement rights without carefully aligned charterparty clauses—particularly around governing law and dispute forums—may find themselves unable to recover ETS-related costs even when entitled to do so in principle. With the financial exposure now covering the full scope of emissions plus additional greenhouse gases as of 2026, gaps in contract chains could carry greater financial weight than in previous years.
Gulf Bunkering does not provide operational or security guidance. This article is for informational purposes only. Operators should consult flag state authorities, P&I clubs, and relevant advisories for decisions relating to transit planning.
Sources: Ship & Bunker
