Photo by Bob Brewer
The UK’s shipping sector will for the first time be required to pay for its emissions when the Emissions Trading Scheme is extended to cover domestic shipping and port emissions from July 2026. Vessels of 5,000 gross tonnage and above will be brought into the scheme under legislation that completed its parliamentary passage on 12 March.
The Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026 was laid before both Houses in January. Its passage through the Lords was contested: a motion to block the legislation was tabled on 25 February, and a non-fatal motion to object followed two days later. Both failed when the Lords debated the instrument on 12 March.
A sector that has never paid for pollution
Until now, shipping has paid no tax on the fuel it uses or the emissions it generates – unlike road users, who paid £25 billion in fuel duty in 2024/25. A fuel duty equivalent for shipping would cost the sector around £1 billion annually; the UK ETS is estimated to raise considerably less, approximately £250 million, from domestic shipping and port calls. Transport & Environment argues this nonetheless provides a crucial revenue stream for investment in green technologies such as electrification, e-fuels and onshore power, with jobs and growth potential for coastal communities.
The sector is a significant contributor to UK transport emissions. Vessels rely almost entirely on fossil fuels and produce nearly one-fifth of UK transport greenhouse gas emissions, despite shipping emissions having fallen 19% since 1990. The Climate Change Committee has stated that “policy development has been insufficient in the shipping sector” and that there are “no credible policies in place to meet the required emissions reduction by the Sixth Carbon Budget.”
Industry opposition
The UK Chamber of Shipping has called for a delay to the extension, a position Transport & Environment describes as “a big mistake.” The campaign group notes the extension has been on the agenda since March 2022 – giving industry four years to prepare – and that the government has already built in an adjustment period, with operators not required to surrender allowances until the deadline for the second year of the scheme on 30 April 2028.
Transport & Environment also disputes industry estimates of consumer cost impacts, saying that increased costs on Irish Sea crossings are likely to be under 2%, not the 6% cited in some estimates, and that the overall effect on goods prices would amount to just pence on large items such as televisions and refrigerators.
The EU comparison
The case for urgency is sharpened by comparison with the EU, whose ETS already covers both domestic and international shipping emissions and is expected to raise around £8.7 billion from the sector this year. The EU is planning to direct £2.5 billion of that sum into scaling up green fuel production by the end of 2027, with France committing £60 million and Spain £216 million to national shipping decarbonisation programmes.
Transport & Environment warns that any further delay would leave the UK ceding first-mover advantage in green shipping technology – losing jobs, economic growth and technological leadership to other nations while remaining dependent on imported fossil fuels.