(www.MaritimeCyprus.com) The forthcoming regulations from the EU and likely the IMO are set to significantly affect the shipping industry, imposing substantial costs on vessel owners. This white paper gives an overview of the key requirements set out in the FuelEU Maritime Regulation (Regulation (EU) 2023/1805), hereafter referred to as ‘FuelEU Maritime’.
Overview of FuelEU Maritime Regulation
FuelEU Maritime, effective from 1 January 2025, establishes stringent GHG emission intensity (gCO2eq/MJ) requirements for ships over 5,000 GT transporting cargo or passengers for commercial purposes in the EU/EEA. The requirements start with a 2% reduction in GHG intensity from 2025 to 2029, relative to the average GHG intensity in 2020. This reduction target then increases to 6% from 2030 to 2034, and further accelerates from 2035 to ultimately achieve an 80% reduction by 2050. Shipowners are presented with several flexibility mechanisms to achieve compliance, including banking, borrowing, and pooling, and penalty payments.
Financial impact of compliance strategies
The cost implications of FuelEU Maritime are significant, but our assessments reveal that certain strategies can effectively reduce these expenses. The option of doing nothing and paying the penalty is expected to be more expensive than the other compliance strategies. By comparing the cost implications for an 80,000 DWT bulk carrier case vessel operating in EU waters over 20 years, we identified several strategies with lower lifetime costs compared to simply blending in bio-MGO in conventional engines. These strategies offer, relative to the bio-MGO strategy, cost savings up to 16%, or 21 MUSD over the lifetime (20 years) of the vessel, underscoring the importance of selecting the most cost-effective compliance strategy. Compliance pooling has the potential to be a tool for sharing costs and also helps to trigger a feasible business case for a vessel utilizing its full green fuel capacity.
Managing commercial impact
Given the potential financial impacts and the opportunities provided by the flexibility mechanisms, it is important for each party to understand their potential obligations and privileges, and how these might affect their commercial and compliance agreements. Unless this is clarified in contracts, the costs may ultimately remain on the ISM company as the responsible company towards the authorities. The ISM company needs to secure from the shipowner coverage for any cost liabilities related to FuelEU.
For shipowners and charterers, the type of charter party contract is significant, as it determines the influence each part has on fuel selection and, by extension, the technical and operational control of the FuelEU compliance balance by end of the charter party period. Verified emissions data is becoming a vital element not only for compliance but also for maintaining operational and commercial integrity across the maritime value chain.
Status of IMO regulatory development on GHGs
The IMO continues to develop regulations aimed at reducing GHG emissions from international shipping. As of October 2024, the IMO has agreed on an overarching
structure, the ‘IMO net-zero framework’, for the needed regulatory amendments in MARPOL Annex VI, expected to be adopted in autumn 2025 and enter into force about mid-2027. In case the IMO adopts new requirements, the EU will review the ambitions of the IMO regulations and examine if FuelEU Maritime should be aligned and to avoid duplication of regulations.
Recap
The FuelEU Maritime Regulation, taking effect from 1 January 2025, sets well-to-wake GHG emission intensity requirements for energy used on board ships over 5,000 GT transporting cargo or passengers for commercial purposes in the EU or European Economic Area (EEA).
Relative to a reference well-to-wake GHG intensity for 2020, the required reduction is:
- 2% (2025),
- 6% (2030),
- 14.5 % (2035),
- 31% (2040),
- 62% (2045), and finally
- 80% (2050).
These GHG intensity targets will gradually force ships sailing into EU/EEA ports to shift fuels, including the adoption of new technologies, with the aim of reducing GHG emissions.
As the shipping industry prepares for the FuelEU Maritime regulations starting January 1, 2025, DNV's latest white paper provides vital guidance on choosing the best compliance strategy. This resource outlines regulatory requirements, evaluates compliance mechanisms, compares costs of selected compliance strategies and examines the roles of key stakeholders to help businesses navigate the commercial impact of these changes.
Click below to download the DNV paper on FuelEU:
Source: DNV
For more resources on FuelEU, Click HERE.
