The shipping company is responsible for ensuring compliance with the requirements of the Fuel EU regulation. As per regulation EU 2015/757 (MRV), the ‘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.
The European Union (EU) have incentivised the use of renewable and low-carbon fuels on vessels to reduce greenhouse gas emissions (CO2, CH4 and N2O) through the adoption of Regulation (EU) 2023/1805 - Fuel EU Maritime. This Regulation forms a substantive part of the EU’s Fit for 55 regulatory package. Ultimately this regulation will provide legal certainty for ship operators and fuel producers and increase the demand for, and consistent use of, renewable and low-carbon fuels, reducing the greenhouse gas emissions from the shipping sector.
How does FuelEU work?
To incentivise the use of renewable and zero carbon fuels on vessels over 5000 GT the EU have set targets to reduce the greenhouse gas (GHG - CO2, CH4 and N2O) intensity of energy used on vessels, based on 2020 reference levels. The graph below provides the reduction required at 5-year intervals until 2050, against the 2020 reference value.
Above: Reduction in GHG intensity of energy used on board from 2020 levels (%).
The GHG intensity is a measure of the CO2 equivalent emissions of the total energy usage on board a vessel during the data collection year (January – December). This must be measured based on reported fuel consumption, from EU MRV, and the emission factors of the fuels used on a well-to-wake basis, as provided for in Annex I of Fuel EU .
There will be a financial penalty, payable during the reporting year immediately after the data collection year, for each quantum of energy used above the reference value. Fuel EU requirements are technology agnostic, but with a focus on low or zero carbon fuels. Therefore, any combination of technologies and fuels can be used to suit the shipowner/operator to minimise any financial exposure but noting that the usage of lower GHG intensity fuels will have larger impacts than improvements in operational energy efficiency at the ship level.
Onshore Power Requirements
In addition, to incentivise zero-emission port stays, passenger and container ships will be required to connect to onshore power supplies at major EU ports from 2030 and all EU ports with onshore power supplies from 2035. This will not be the case for very short stays (<2 hours) or if the ship uses zero-emission technology whilst at berth. Any port contraventions will also be subject to financial penalties.
RFNBOs
The usage and uptake of Renewable Fuels of non-Biological Origin (RFNBOs), also known as e-fuels (including e-diesel, e-methanol, e-LNG, e-hydrogen, e-ammonia, e-LPG and e-dimethyl ether (DME)) will be monitored by the European commission, who will calculate and annually publish on the basis of data collected under Fuel EU, the share of RFNBO in the yearly energy used on board vessels falling under the scope of Fuel EU. To encourage the uptake of such fuels their usage will be incentivised from 1 January 2025 to 31 December 2033. However, if the share of RFNBOs is less than 1% of all fuel usage in scope of the regulation, between 1 January and 31 December 2031, a sub target will be established from 1 January 2034 to mandate RFNBO usage.
Flexibility compliance mechanisms
To aid compliance and minimise financial exposure to the penalties of Fuel EU shipowners / managers may choose to bank or borrow compliance, or pool within or between fleets. These are known as flexibility compliance mechanisms.
For ships which are over compliant in any one year a shipowner / manager may choose to bank their compliance surplus for use on the same ship in the following reporting period. Alternatively, shipowners may choose to pool their surplus, sharing the compliance surplus of one ship with under compliant ship(s) thereby minimising any penalties accrued in a year. Pooling can be applied either within, or between, a fleet of ships where a contractual agreement is in place.
For ships which are under compliant in any one year a shipowner / manager may choose to borrow an advanced compliance surplus from the subsequent reporting period to lower the compliance deficit in that year. However, whatever advanced compliance surplus is borrowed will have to be paid back plus an additional 10%. This will be implemented by taking the borrowed amount (plus 10%) from the ships compliance balance in the following reporting period (i.e. the compliance target for the following period will be lower). Alternatively, a shipowner may choose to enter a pool with another ship, within its own fleet or another fleet (if contractually agreed) to share any compliance surplus, thereby minimising the compliance deficit for a ship.
What do ship owners/ ship managers need to do?
The vessel’s ISM company/DoC holder is responsible for compliance with Fuel EU. As such owners/managers operating vessels > 5000GT carrying passengers and cargo and calling at an EEA port will need to:
- By 31st August prepare and submit monitoring plans to verifiers for approval.
- From 1 January 2025 collect and report data according to the monitoring plan, for:
- 100% of energy used for voyages between two EU ports (or EEA) of call and at berth on a well to wake basis)
- 50% of energy used for voyages between an EU port (or EEA) and an extra-EU destination.
- By 30 June 2026 ensure a valid Fuel EU Document of compliance is onboard the vessel.
