FuelEU – shipping takes another step in reducing greenhouse gas emissions

Posted: 05/09/2024

On 1 January 2025, the FuelEU Maritime Regulation (Regulation (EU) 2023/1805) shall come into force. The goal of this regulation is to reduce EU greenhouse gas emissions in the maritime sector and promote the use of renewable, low-carbon fuels, and clean energy technologies for ships.

The regulation applies to all ships calling at EU ports, regardless of their flag, of above 5,000 gross tonnage which are used commercially to transport passengers or cargo.

Greenhouse Gas (GHG) intensity limits

FuelEU sets maximum limits for the yearly average energy consumed on board a ship during each calendar year, starting from 1 January 2025. The limits are set in relation to a reference value, this being the average GHG intensity of energy consumed by ships in 2020; namely 91.16 grams of CO2 equivalent per mega joule, calculated on a well-to-wake basis. This differs to the EU ETS and IMO Carbon Intensity Indicator reporting requirements, under which emissions are only measured on a tank-to-wake basis. The goal of FuelEU is to gradually shrink the limit so that GHG emissions are reduced by 80% by 2050. 

When calculating energy use, the following must be taken into consideration:

• 100% of the energy consumed on voyages between ports of call in EU member states, unless the port of call is located in an 'outermost region' of the EU (such as French Guiana or the Canary Islands), in which case half of the energy consumed is counted;
• 50% of the energy consumed on voyages between a port of call in an EU member state and a port of call outside the EU;
• 100% of the energy used during a ship’s stay within a port of call in an EU member state.

For the purposes of the regulation, a voyage is any movement of a ship that originates from or terminates in a port of call and that serves the purpose of transporting passengers or cargo for commercial purposes.

The regulation establishes an incentive regime to encourage the uptake of renewable fuels of non-biological origin (RFNBO)

RFNBOs are fuels produced from renewable energy sources, such as solar or wind. The most prevalent technology in this area is the use of electrolysis, powered by electricity derived from a renewable source, to produce hydrogen. This hydrogen can then be combined with either nitrogen or carbon to produce a synthetic fuel. The product is commonly referred to as ‘e-fuels’ or ‘power-to-gas/liquid’.  

RFNBOs are cleaner to produce than typical fuel products but they still emit GHGs at comparable intensities. To recognise the overall cleaner effect on the environment though, the energy consumed resulting from the use of RFNBOs will be halved for the calculation of the ship’s yearly GHG intensity under FuelEU. 

The regulation stipulates that the EU commission shall publish annually a report of the share of RFNBOs used by ships falling under the regulation’s scope. If, by the end of 2031, the share of RFNBO use is less than 1%, a sub target of 2% shall be imposed for each ship from January 2034. The goal of the regulation is clearly to help facilitate a market for RFNBOs. The regulation does state though that if there is evidence of insufficient production capacity and availability of RFNBOs to meet this, the sub target shall not apply. 

New zero-emission requirements for ships at berth

From January 2030, ships moored at a major port of call within the EU must connect to the on-shore power supply (OPS) and use it for all electrical power demand at berth. This will apply to all EU ports from January 2035. The requirement does not apply where a ship is moored for less than two hours, where a ship uses zero-emission technology for its electrical power needs, or if connecting to OPS is not possible, whether due to lack of available connection points or for safety reasons.

A system of self-monitoring and reporting

The first step for shipowners was to submit a monitoring plan to verifiers for each of their ships by 31 August 2024. Shipowners who have missed this deadline should prepare and submit their monitoring plans without further delay. A verifier is essentially a body accredited by the EU to check whether data submitted is correct. The FuelEU database, which is held on the same platform as the EU-MRV reporting platform (THETIS-MRV), lists accredited verifiers for shipowners to choose from. The EU has published a template monitoring plan, which can be accessed here. 

A summary of the key information required is as follows:

• a description of the energy conversion systems installed on board, and the related power capacity;
• a description of the standards and characteristics of the equipment to allow connection to OPS;
• the value of the established total electrical power demand of the ship at berth;
• a description of the intended sources of energy to be used on board while in navigation and at berth;
• a description of the procedures for monitoring and reporting the well-to-tank and tank-to-wake emission factors of energy to be used on board;
• a description of the procedures used to monitor the completeness of the list of voyages;
• a description of the procedures used for determining activity data per voyage;
• a description of the procedures, systems and responsibilities used to update any of the data contained in the monitoring plan.

Shipowners are obligated to review their monitoring plans at least once a year. If there are any substantive changes to a ship’s ownership, energy systems or the types of fuels used, the monitoring plan must be updated without undue delay.

Shipowners must record pertinent data for each voyage

The following information must be recorded:

• the ports of departure and arrival, including date and times of departure/arrival and time spent at berth;
• the use of OPS (where applicable as above);
• the amount of fuel consumed, both at sea and at berth.

This information must be compiled on an annual basis into a ship-specific FuelEU report and submitted to verifiers by 31 January of the following year. Once approved, the verifier shall, by 30 June, issue a FuelEU document of compliance for the relevant ship, which will be valid for 18 months. If a ship fails to receive a document of compliance, shipowners will be liable to pay a penalty, calculated with reference to the percentage by which GHG intensity should have been reduced to meet the relevant target. If this penalty is paid by 30 June of the relevant period, a document of compliance will be issued for the ship. If a ship fails to receive a document of compliance for two consecutive periods, the ship may become subject to an expulsion order. This would effectively restrict the vessel from calling at ports in the EU, other than that of its flag.

Shipowners may bank, borrow or pool compliance

If a ship is over-compliant in a given period, the shipowner may bank this surplus when calculating GHG intensity in the next period. Conversely, if the GHG intensity for a ship is above the limit for a given period, the shipowner may borrow an advanced compliance surplus from the next period. In this instance though, the surplus will need to be paid back in the next period with an additional 10% on top. 

Shipowners are permitted to pool ships in order to offset the undercompliance of one ship with the overcompliance of another. The regulation not only allows shipowners to pool within their own fleets but also to pool their vessels with those owned by different companies. The total pool compliance must be positive to enable this. A ship can only be included in one pool per period and a ship that has borrowed compliance as above cannot be pooled in the period from which it has borrowed.  

FuelEU will therefore impose heavy responsibilities on shipowners operating within the EU. It is important that they are well informed on their obligations under the regulation and are prepared to handle the resulting administrative burden.

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