The EU 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 Maritime at a glance
As part of the Fit for 55 package, FuelEU Maritime will enable the European Union to reach its target of carbon neutrality by 2050. It promotes the use of renewable and low-carbon fuels and speeds up a large-scale production.
Ideally, renewable and low-carbon fuels (RLF) should represent 86-88% of the international maritime transportation fuel mix by 2050 to contribute to the EU’s targets. FuelEU Maritime aims to drive demand and mitigate competition between operators and ports during the fuel transition.
The regulation’s two key targets areas are:
- Mandatory use of onshore power supply (OPS) or other technologies offering equivalent environmental benefits at berth in an EU port for calls lasting more than two hours
- GHG intensity limits on energy used onboard a ship
What happens next in the legislative process concerning FuelEU Maritime?
FuelEU Maritime Regulation 2023/1805 was published in the EU Official Journal on 22 September 2023. It entered into force on 12 October 2023. However, it would only apply from 1 January 2025. As a regulation, FuelEU is directly enforced, without national transposition.
Which size and type of ship will FuelEU Maritime apply to?
From 2025, FuelEU Maritime will include ships of 5000 GT and above, regardless of their flag. In future, and pending reviews, the regulation’s scope may be increased to include more vessels.
As for voyages, FuelEU maritime applies to:
- 100% of energy used for voyages between two EU ports (or EEA) of call and at berth
- 50% of energy used for voyages between an EU port (or EEA) and an extra-EU destination
Transhipment is also covered under FuelEU Maritime if:
- It occurs within a zone of 300 nautical miles
- The share of transhipment containers exceeds 65% of total container traffic at the relevant port
FuelEU Maritime will apply to 50% of the energy used between the extra-EU port of origin or destination and the EU port (or EEA) in question.
What are FuelEU Maritime’s yearly targets and key requirements?
The annual reduction targets will become more ambitious up to 2050 to reflect developments in low-carbon fuel technology and availability:
- 2% by 2025
- 6% by 2030
- 14,5% by 2035
- 31% by 2040
- 62% by 2045
- 80% by 2050
This means onboard energy will be subject to the following GHG intensity limits:
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The EU intends to incentivize renewable fuel use between 2025 to 2034; they will provide credits for ships using renewable fuels of non-biological origin (RFNBO), such as e-fuels produced using renewable electricity. By 2034, at least 2% of yearly average onboard energy should be met by such fuels.
The use of OPS at berth will apply as follows:
- Container and passenger ships at quayside in TEN-T core and comprehensive network ports from 2030
- Container and passenger ships at quayside in all EU ports (or EEA) where the quay is equipped from 2035
Does FuelEU Maritime apply to all types of GHG emissions?
Firstly, it should be noted that the FuelEU framework adopts a well-to-wake (WtW) approach to emissions. Three types of GHG emissions are included in its scope:
- Carbon (CO2)
- Methane (CH4)
- Nitrogen oxide (N20)
FuelEU’s default emissions factors will address fossil fuels – but biofuel and biogas’ emission intensity will be determined by the Renewable Energy Directive (RED).
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.
What are the derogations or exemptions from FuelEU Maritime?
The following cases of energy use will be exempt up until 31 December 2029:
- Passenger ships providing transportation services between ports of call under the jurisdiction of the same Member State when one port of call is located on an island with fewer than 200,000 permanent residents
- Energy used between two ports of call in outermost regions, and the energy used during their stay in port
- Passenger ships operating before this regulation comes into force, on specific routes between their mainland ports of call and ports of call under their jurisdiction located in an island or the cities of Ceuta and Melilla
Ice-classed ships and ships sailing in ice will also benefit from a reduction factor in the GHG intensity of energy used onboard until 31 december 2034.
There are three exemptions from the mandatory use of OPS:
- In unscheduled port calls, for emergency, safety and lifesaving reasons, which will have to be certified by the administrating body of that port
- Before 2035, if OPS is unavailable or incompatible in a port of call
- Ships staying at port for less than two hours.
How do I achieve compliance with FuelEU Maritime?
There are several factors that shipping companies must be aware of when it comes to FuelEU Maritime compliance.
Monitoring and reporting GHG intensity
For shipping companies :
- Each individual ship will need its emissions reported on a new database
- They are responsible for monitoring the type and amount of energy used at port and in operation
- They must submit a standardized emissions monitoring plan per vessel to verifiers by August 31 2024
- They must record the WtW emissions factors for all their fuels
- They must submit their emissions data to the verifier by 31 March each year
- They will assess each monitoring plan and calculate the yearly average GHG intensity for a ships’ onboard energy use and OPS, and how this compares to annual targets
- They will issue a document of compliance annually in June, to be kept onboard all ships calling at EU throughout the reporting period
Borrowing, banking and pooling mechanisms
FuelEU Maritime allows some flexibility, in the sense that shipping companies will also be able to achieve compliance through banking, borrowing and pooling mechanisms.
For borrowing and banking:
- Ships can bank their compliance surplus within a given reporting period for the following period
- Ships can borrow an advance compliance surplus from the following reporting period to make up for a deficit
However, this mechanism is only granted with the verifier’s approval and is not applicable to:
- Amounts exceeding the GHG intensity limit multiplied by the ship’s energy consumption by more than 2%
- Two consecutive reporting periods
When a ship is not compliant during the reporting period and has borrowed an advance compliance surplus in the previous reporting period, the shipping company will have to pay a remedial penalty.
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As for pooling: two or more ships verified by the same body may pool their compliance balance to achieve compliance per individual ship, even if they are controlled by more than one company.
There are some restrictions:
- Ships' compliance can only be included in one pool per reporting period
- The ship must have been compliant in the year -1
- The total pooled compliance must be positive; ships that had a compliance deficit cannot have this increase as a result of the allocated pooled compliance
- Ships that had a compliance surplus cannot have a deficit as a result of the allocated pooled compliance
The pool’s composition and allocation of compliance is recorded by the verifier in the Fuel EU database by 30 April each year.
Who is responsible for ensuring compliance with FuelEU Maritime?
The fleet’s compliance is the owner’s responsibility, although it is possible to transfer it under contract to another entity under the ISM Code. This entity will then hold the responsibility for all decisions that impact the GHG intensity of energy used onboard.
Penalties for non-compliance
If for any reason a ship is found non-compliant with either the limits on GHG intensity or the mandatory use of OPS, the shipping company will be subject to penalties. The amount payable will be calculated on the FuelEU database and will need to be paid for compliance to be achieved. Ships may be issued an expulsion order if they are non-compliant for two consecutive years.
FuelEU Maritime revenues
The revenues from the payment of FuelEU penalties will be used for two purposes:
- Promoting the distribution and use of renewable and low-carbon fuels in the maritime sector
- Helping maritime operators meet their climate and environmental goals
To ensure revenues are being used as expected, EU Member States will be required to report transparently on how they use them.
How can I keep up to date with Fit for 55 news?
The FuelEU Maritime update will impact shipping in EU waters not only in terms of fuel choices in the long term, but in operational costs in the short- to mid-term.
Bureau Veritas is on hand to help ship owners and operators make the necessary preparations for all aspects of Fit for 55. As the text is finalized and adopted, we will provide updated information and advice. To stay up to date with the latest developments on FuelEU Maritime and other Fit for 55 measures, subscribe to our newsletter.