Key elements are subject to change before the definitive measures and corresponding implementing/delegated acts are adopted.
Reducing GHG intensity and promoting renewable and low-carbon fuels in the EU
The EU’s Fit for 55 package has been proposed to decarbonize the European economy in line with the EU Green Deal. It includes new and revised measures, some of which will now include the maritime sector for the first time.
FuelEU is part of the proposed Fit for 55 package directed at shipping. By reducing the greenhouse gas (GHG) intensity of ships’ energy when travelling to, from or within the EU, it aims to promote the use of renewable and low-carbon fuels (RLF).
RLF should represent 86-88% of the international maritime transportation fuel mix by 2050 to contribute to the EU’s targets. RLF production and distribution are addressed in the Renewable Energy Directive (RED) and the Alternative Fuels Infrastructure Directive (AFID) respectively. On the other hand, FuelEU aims to drive demand and mitigate competition between operators and ports during the fuel transition.
What will FuelEU apply to?
- All vessels of any flag above 5,000 GT travelling to, from or at berth in ports in the EU*
- 100% of energy used at berth in an EU port
- 100% of energy used in intra-EU voyages
- 50% of energy used on extra-EU voyages
* Some vessels will be exempt, including:
- Naval vessels
- Fishing vessels
- Ships using non-mechanical propulsion
January 2025: date from which FuelEU may apply if adopted, to allow the shipping sector to benefit from new technological breakthroughs
What are the key requirements ?
The calendar of the GHG intensity reduction targets is defined as follows :
- -2% from 2025
- -6% from 2030
- -14.5% from 2035
- -31% from 2040
- -62% from 2045
- -80% from 2050
From 2034, at least 2% of the yearly average energy used on-board a ship shall be met by RFNBOs, if the Commission reports that by 2031 RFNBO amount to less than 1% in fuel mix.
OPS will be mandatory for stays at berth of more than two hours by:
- 2030 for container and passengers ships at quayside in TEN-T core and comprehensive network ports;
- 2035 for container and passengers ships at quayside in all EU ports where the quay is equipped.
The shipping industry has raised concerns about additional costs for the maritime transportation. It remains to be seen if this price increase can be deferred to clients. Shipowners are also concerned that FuelEU is inconsistent with EU ETS. They have also cast doubt on the ambition level of the yearly targets.
The IACS has noted that FuelEU verifiers will need to spread over an extensive network to be able to check intra- and extra-EU voyages. They will also need high levels of knowledge and seniority and have their impartiality attested to by accreditors.
How might FuelEU work?
The yearly GHG limit under FuelEU will be based on the average onboard GHG intensity of the fleet in 2020 – to be determined by the European Commission. The annual reduction targets will become more ambitious up to 2050 to reflect developments in low-carbon fuel technology and availability.
Shipping companies will need to calculate GHG emissions per unit of energy used on board, based on their reported fuel consumption and the emissions factors of their respective fuels. Notably, FuelEU adopts a well-to-wake (WtW) approach to assessing a fuel’s emissions factor.
The emission intensity of biofuels and biogas, among others, will be determined using the RED Directive, whereas fossil fuels should be assessed using FuelEU's default emission factors.
Passenger ferries and containerships at berth in an EU port will be required to connect to an onshore power supply (OPS) as of January 1, 2030. Exemptions will be allowed in certain emergency situations, or for ships at berth under two hours.
A reduction factor for the GHG intensity of energy used on-board by ice-classed ships and those sailing in ice will be applicable until 31 December 2029.
Who will enforce FuelEU ? Who will it impact?
The European Commission will implement an electronic database to register the performance and compliance of each ship.
Shipping companies are responsible for monitoring the type and amount of energy used in operation and at berth. They must submit to verifiers a standardized emissions monitoring plan for each of their vessels by August 31, 2024. Their records must contain the WtW emissions factors for each type of fuel used at berth and at sea. At the end of April each year, shipping companies will need to submit their data, including that already reported for MRV regulation.
Verifiers will assess each monitoring plan and calculate the yearly average GHG intensity of a ship’s onboard energy, use of OPS, and its reflection of yearly targets. The verifier will issue a document of compliance, which must be kept onboard all ships calling at an EU port until the end of that reporting period.
FuelEU allows operators some flexibility: they can roll over or borrow excess compliance from one year to another, or pool compliance between multiple vessels. If a ship has a deficit of compliance units, its owner may obtain some in advance, though not for over 2% of the target, or over two consecutive reporting periods.
Ships that do not meet the required yearly limits will be subject to penalties. These will be calculated by the verifier according to the amount and cost of low-carbon fuel that should have been used to meet the requirements. The revenues this generates may fund the promotion of renewable and low-carbon fuels and help operators to meet their goals.
Is FuelEU finalized?
The European Parliament and the Council reached a deal at last trialogue which was held on 22 March 2023.
The European Parliament's Transport and Tourism (TRAN) Committee is scheduled to confirm the provisional agreement on 24 May 2023, followed by a plenary vote in July. Once the European Parliament has adopted this deal as its position at first reading, the Council is expected to adopt the Parliament's position.
Once formally approved, the resulting Regulation would enter into force on the twentieth day following that of its publication in the EU Official Journal. However, it would only apply as of 1 January 2025.
How can I keep up to date with Fit for 55 news?
FuelEU will impact shipping in EU waters not only in terms of fuel choices in the long term, but also operational costs in the short- to mid-term. Like all of Fit for 55 package, the final form of the FuelEU Regulation has yet to be decided, though it will become clearer in the months ahead.
Bureau Veritas is on hand to help ship owners and operators make the necessary preparations for all aspects of Fit for 55. As the proposal is finalized, we will provide updated information and advice. To stay up to date with the latest developments on FuelEU and other Fit for 55 measures, subscribe to our newsletter.