August 2, 2023
The FuelEU maritime regulation is the European union's newest measure to decarbonise the shipping industry. It sets greenhouse gas intensity limits to ships trading in the EU from 2025, gradually decreasing the intensity over time, by 2% in 2025 to 80% in 2050. Here is a quick guide to the FuelEU maritime, from a commercial shipping perspective.
The FuelEUMaritime regulation is part of EU’s Fit for 55 package and together with the European Union’s Emissions Trading System (EU ETS) represents the union’s key instruments to reducing the carbon footprint of the maritime sector. Whereas the ETS promotes energy savings, FuelEU addresses fuel technology.
The FuelEU regulation aims to increase the use of sustainable alternative fuels in European shipping. It will represent a major added cost to the maritime industry and commercial shipping decisions will be impacted by the new regulation. That’s why we describe the main provisions of the new regulations, from a commercial shipping aspect.
The FuelEU maritime introduces:
The regulations sets well-to-wake GHG intensity limits on energy used onboard ships trading in the EU from 2025. The yearly limits are set as a percentage reduction relative to the fleet average GHG intensity in 2020 (91.16 gCO2/MJ). Ships will have to gradually reduce GHG emissions by cutting the amount of GHG in the energy they use
The GHG intensity means the amount of CO2, CH4 and N2O emissions per MJ of energy used, expressed in grams of CO2 equivalents.
GHG emissions are calculated in a well-to-wake perspective, including emissions related to extraction, cultivation, production and transportation of the fuel, in addition to emissions from combustion of fuel use onboard the ship.
To encourage early market development and deployment of the most sustainable fuel technologies, the regulation provides a combination of measures to ensure the support for the uptake of sustainable RFNBO. The first is the possibility to use a ‘multiplier’ until the end of 2033, allowing the energy from RFNBO to count twice. In addition, a 2 % RFNBO subtarget will apply as of 2034 if, the share of RFNBO in the maritime bunker fuels is less than 1 % by 2031.
From 1 January 2030, ships shall connect to on-shore power supply (OPS) and use it for all its electrical power demand at berth. The electricity supplied to the ship is included in the calculation of the annual GHG intensity, but it can be reported as zero well-to-wake GHG emissions.
The regulation applies to
If a ship exceeds the yearly intensity limits set out in the regulation, a FuelEU penalty must be paid. This penalty is based on the amount and cost of renewable and low-carbon fuels that the ships should have used to meet the requirements.
The penalty for a non-compliant port call will be proportionate to the cost of using the electricity.
Companies have the flexibility of rolling-over a compliance surplus from one year to another or borrowing an advance compliance surplus, within certain limits, from the following year. The use of OPS at berth is not eligible for a similar flexibility.
The compliance balances for GHG intensity and, if applicable, the RFNBO subtarget of two or more ships, may be pooled for the purposes of complying with the FuelEU requirements. The pool is not limited to ships of the same company.
A ship’s compliance balance may not be included in more than one pool in the same reporting period. However, two separate pools may be used for GHG intensity target and for the subtarget for RFNBO.
The FuelEU maritime regulation will be published in the EU’s official journal autumn 2023 and will enter into force the twentieth day after this publication. The new rules will apply from 1 January 2025, apart from articles 8 and 9 which will apply from 31 August 2024.