Maritime compliance: FAQs on FuelEU Maritime from BIMCO

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(www.MaritimeCyprus.com) The FuelEU Maritime Regulation is a part of the EU’s “Fit for 55” package intended to fight climate change by reducing greenhouse gas emissions in shipping. BIMCO has established a dedicated subcommittee to examine the implications of the FuelEU Maritime Regulation (the FuelEU Maritime) and to develop clauses to address its introduction.

The subcommittee's objective is to develop practical contractual solutions to assist the industry in facilitating compliance. The subcommittee is currently focusing on developing a clause for time charter parties and another clause for SHIPMAN, while also considering bunker supply terms and possible clauses related to the pooling mechanism introduced by the regulation.

The FuelEU Maritime has the potential to significantly impact the shipping industry, even more so than the EU Emissions Trading System (ETS), and may require stakeholders to take measures to align their contractual frameworks even before the regulation comes into force in 2025.

FuelEU

Frequently Asked Questions about FuelEU Maritime

What is the FuelEU Maritime?

The FuelEU Maritime Regulation is a part of the EU’s “Fit for 55” package intended to fight climate change by reducing greenhouse gas emissions in shipping. It aims to achieve a reduction in the EU’s net greenhouse gas emissions by at least 55% by 2030. It supplements the EU Emissions Trading System, CII ratings  and other decarbonisation initiatives.

When will FuelEU Maritime come into effect?

The Regulation will apply to commercial vessels with a gross tonnage of more than 5,000 used for transport of cargo or passengers, regardless of the flag, from 1 January 2025. Nonetheless, the first ship specific monitoring plans will need to be submitted by August 2024.

How does FuelEU Maritime work?

FuelEU Maritime sets well-to-wake greenhouse gas (GHG) emission intensity requirements on energy used on board ships trading in the EU from 2025. The yearly average greenhouse gas (GHG) intensity of all energy used on board, measured as GHG emissions per energy unit (gCO2e/MJ), needs to be below a required level. The 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 energy used on board the ship.

What is the scope of the FuelEU Maritime?

The FuelEU Maritime will apply in respect of 100% of the energy used during calls at EU ports and on voyages between two EU ports (intra-EU) and 50% of the energy used on voyages between an EU and a non-EU port (extra-EU). The definitions of ‘voyages’ and ‘port calls’ mirror the terms in the ETS. A port call will qualify for the purposes of the regulation if cargo is loaded/unloaded or passengers are embarked/disembarked but not if it is a stop made solely to bunker, change crew or make STS-transfers outside ports.

What are the reduction targets under the FuelEU Maritime?

The main reduction targets under the FuelEU Maritime are tied to a reference of the fuel intensity rating of the GHG emissions relative to the energy used onboard vessels. The baseline is 91.16 g CO2/eMJ based on the MRV data for voyages performed in EU 2020. Under the Regulation, vessels’ GHG intensity rating is to be reduced in steps, with a 2% reduction in 2025 and up to, ultimately, an 80% reduction by 2050.

Who is responsible for compliance with the FuelEU Maritime?

Unlike the EU ETS, the company responsible for compliance with FuelEU Maritime is always the ISM company i.e. the Document of Compliance (DoC) holder, irrespective of whether the DoC holder is the registered owner, a bareboat charterer, or a third-party technical ship manager.

Article 3(13) of the Regulation states:

"company" means the shipowner or any other organisation or person such as the manager or the bareboat charterer, which has assumed the responsibility for the operation of the ship from the shipowner and 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

What are the compliance mechanisms under the FuelEU Maritime?

The FuelEU Maritime introduces various means for companies to comply, the most straightforward one being burning a fuel that has a compliant GHG emission intensity. In case of bio, zero and low carbon fuels, that value will need to be certified, as required per EU regulations, by a Certificate of Compliance. According to the FuelEU Maritime, such Certificate will need to be added to the Bunker Delivery Notes (BDN).

Alternatively, a ship can bank some surplus it had in the current year, or borrow some surplus it expects to have the following year to handle any deficit although borrowing comes with an “interest” element and certain limits under Article 20 of the Regulation. Other options include pooling and paying (the penalty under the Regulation – see below) for compliance.

What are the penalties for non-compliance with the yearly target set out in the FuelEU Maritime (i.e. the yearly average GHG intensity of the energy used on board)??

If companies do not comply, they will have to pay a penalty under the Regulation. This essentially means that the Regulation allows a pay-to-comply mechanism. However, the penalty factor grows by 10 percentage points if a shipping company does not comply for two years in a row. This can be distinguished from a shipping company being in breach of requirements set out under the Regulation. In this regard, the Regulation requires EU Member States to lay down rules on sanctions applicable to infringements of the Regulation pursuant to Article 25.

How does FuelEU Maritime promote the use of RFNBOs?

The EU Commission had initially designed the FuelEU Maritime as a fuel and technology-neutral legislation putting all sustainable and non-sustainable fuels on equal footing. However, co-legislators decided to add mechanisms to support the uptake and to stimulate demand for renewable fuels of non-biological origin (RFNBOs). RFNBOs are synthetic fuels produced from renewable electricity and carbon captured directly from the air (for example, e-diesel, e-methanol, e-LNG). The decision was to mandate a 2% sub-target of RFNBO use from 2034 onwards and an incentive to use RFNBOs with a multiplier of 2 until 2034. Between 1 January 2025 to 31 December 2034, the use of RFNBOs will be incentivised with a “multiplier of 2” meaning that every tonne of RFNBO will count twice to the achievement of the overall GHG intensity targets used on board. Both instruments take advantage of the pooling system, which allows companies to exchange units of compliance between themselves.

If and under which circumstances RFNBOs (as well as biofuels) can be certified and so its more favourable emission factor is used, still needs to be clarified further at the EU level through secondary legislation.

What are the additional requirements for zero emissions at berth?

From 1 January 2030, containerships and passenger ships (>5,000GT) are required to connect to onshore power supply (OPS) when securely moored at berth, in all ports covered by the Alternative Fuels Infrastructure Regulation (AFIR). Also, in all non-AFIR ports, as from 1 January 2035, for all ports that develop OPS capacity.

Source: BIMCO

 

 

 

 

For more info on EU Emissions Trading System, click HERE

 

 

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