FuelEU Maritime

What is FuelEU Maritime?

As part of the EU’s Fit for 55 package, FuelEU Maritime aims to kick-start the large-scale production of sustainable maritime fuels. The new FuelEU Maritime directive sets targets for the yearly average lifecycle greenhouse gas (GHG) emissions intensity for the energy used onboard vessels. Starting from 2025, the first reporting year, the GHG intensity limit will be 2% lower than the 2020 reference value of 96.16 gram of CO2 equivalent per MJ. This means that many vessels, when continuing business as usual, will be non-compliant immediately when the regulation enters into force.
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Every five years, the target will become more strict, all the way to a 80% decrease of GHG intensity from 2050 on. Other parts of the regulation dictate sub-targets for the share of Renewable Fuels from Non-Biological Origin (RFNBO) in a vessel’s fuel mix and, from 2030, a mandate to use onshore power supply (OPS) or a zero-emission alternative when berthing at specified European ports.

FuelEU offers flexibility mechanisms for non-compliant vessels, allowing the shifting of overcompliance between years and allowing underachieving vessels to pool with overachieving vessels to compensate for compliance gaps.

Who is responsible?

The regulation states "The entity responsible for ensuring compliance with this Regulation should be the company, defined as the shipowner or any other organisation or person, such as the manager or the bareboat charterer, that has assumed responsibility for the operation of the ship from the shipowner and that, on assuming such responsibility, has agreed to take over all the duties and responsibilities imposed by the International Management Code for the Safe Operation of Ships and for Pollution Prevention as implemented within the Union by Regulation (EC) No 336/2006 of the European Parliament and of the Council (15)."
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‍As the majority of shipowners delegate ISM code responsibilities, the DoC holder will generally be responsible.

How do I become compliant?

Many vessels operating on conventional fuels will have higher GHG intensities than the 2025 target. There are several options to decrease overall GHG intensity, such as installing wind assisted propulsion and connecting to shore power. What we will see for sure are changes in the current fuel mix. When a company is not able to bring down the GHG intensity to the target, and does not make use of any of the flexibility mechanisms, a penalty needs to be paid.

What is its scope?

FuelEU’s scope is very similar to that of EU ETS, covering 50% of the energy used on voyages arriving at or departing from the EEA, and 100% of energy used on intra-EEA voyages for ships above 5.000 GT. One of the main differences is that FuelEU covers well-to-wake emissions of fuels, whereas EU ETS only considers tank-to-wake emissions. FuelEU covers CO2, methane (CH4), and nitrous oxide (N2O) emissions. The additional requirement for zero-emission at berth only applies to container and passenger vessels. There are exemptions in place for ice class ships, and for voyages from and to small islands, outermost regions, and transshipment ports.

How do I prepare?

The responsible party will need to record additional information on an ongoing annual basis for each ship arriving at, berthing at, or departing from a European port. This includes the amount and type of fuels consumed at berth and at sea and the emission factors of those fuels - broken down by well-to-tank, tank–to-wake, and fugitive emissions. A FuelEU monitoring plan indicating the chosen methods for monitoring and reporting the required information needs to be submitted before the 31st of August, 2024. A standardised template is expected to be published in Q1 2024.

Furthermore, for all parties in the value chain, it is important to start understanding exposure, financial consequences, and start the conversation with different stakeholders.

What is banking, borrowing and pooling?

Banking, borrowing, and pooling, are the three different flexibility mechanisms offered by FuelEU. If a ship's GHG intensity is below the target of the reporting year, its overcompliance can be carried over to the next year. If a ship's GHG intensity is above the target, the difference can be borrowed from next year's expected overcompliance. For banking, there is no limit to the amount of years overcompliance can be carried over. Borrowing however is not allowed for two consecutive periods and is limited to small amounts.

Under the pooling mechanism, undercompliance of one or more vessels can be compensated by overcompliance by one or more vessels. This can be done for vessels from the same shipping company, but pools can also be set up between multiple companies. Companies are also allowed to set up two separate pools for the GHG intensity and (if applicable) the RFNBO subtarget. There are some additional rules. Ships that use borrowing can for example not join a pool.

FuelEU Maritime

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