The Fuel EU Maritime Regulation[1] (FuelEU Maritime) is another instrument in the 'Fit for 55'[2] toolbox of the EU to achieve its goal of climate neutrality by 2050 with an intermediate goal of reaching a 55% reduction of greenhouse gas emissions by 2030[3]. 'Greenhouse gas emissions' or 'GHG emissions' means the release of carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) into the atmosphere[4]. FuelEU Maritime is a complementary regulatory initiative besides the EU Emission Trading System (ETS) already in force, aiming to achieve decarbonisation and energy transition in Europe.
Introduction
FuelEU Maritime will enter into force mainly on 1 January 2025[5] , except for Articles 8 and 9 of the FuelEU, which will enter into force on 31 August 2024[6] already. Whilst the EU ETS encourages energy efficiency and saving, as well as energy transition to fuels which do not produce GHG emissions by putting a price tag on CO2 emissions, the FuelEU Maritime addresses fuel technology by promoting the use of renewable and low-carbon fuels in shipping.
Obligation to submit a monitoring plan by 31 August 2024
Articles 8 and 9 of FuelEU Maritime impose the obligation on the company[7], to submit to the verifiers[8] (same verifiers as under the EU ETS) by latest 31 August 2024 a monitoring plan for each of their ships indicating the method chosen from among the methods set out in Annex I of the FuelEU Maritime for monitoring and reporting the amount, type and emission factor of energy used on board by ships and other relevant information.
For ships falling under the scope of this regulation for the first time after 31 August 2024, companies shall submit a monitoring plan to the verifier without undue delay and no later than two months after each ship's first call at a port under the jurisdiction of a Member State.
Focus on the fuel
The focus of FuelEU Maritime is on the fuel itself and the demand for it, with the intention of leading to an uptake of the production of zero- and low-carbon fuels of which maritime operators will need to use an increasing proportion of. However, there is no obligation on to use a specific technology as FuelEU Maritime has a technology-neutral approach.
Scope
The above-mentioned limits set by FuelEU Maritime on the GHG intensity of the energy used on board by a ship apply to all ships of above 5,000 gross tonnages that serve the purpose of transporting passengers or cargo for commercial purposes, irrespective of their flag. FuelEU Maritime applies to EU and non-EU registered cargo and passenger vessels equally.
From 1 January 2025 the energy used by these ships will count as follows[9]:
100% of the energy used from ships calling at an EU/EEA port for voyages within the EU/EEA (intra-EU/EEA) will count[10];
50% of the energy used from voyages to or from EU ports (extra-EU/EEA); as well as
100% of the energy used when ships are at berth in EU/EEA ports.
From 2025, shipping companies will report energy used on board their ships and their emissions through THETIS-MRV, operated and maintained by the European Maritime Safety Agency (EMSA). This system will act as a one-stop shop for companies, as shipping companies already report ships' emission data through THETIS-MRV for the EU ETS.
Reduction of GHG intensity
FuelEU Maritime establishes a target reduction framework for the yearly average 'GHG intensity of the energy used on board', which is the amount of GHG emissions in grams (g) of carbon dioxide (CO2) equivalent (eq) established on a well-to-wake basis, per megajoule (MJ) of energy used on board (gCO2eq/MJ). 'Well-to-wake' refers to a method for calculating emissions that takes into account the GHG impact of energy production, transport, distribution and use on board, including during combustion.
The targets for reducing the GHG intensity start small for 2025 with an overall reduction of - 2%, but then the targets become increasingly stringent up to an 80% reduction target in 2050 as outlined in the table below[11]. These reductions are related to a reference value calculated for the fleet in MRV for 2020.
Year | 2025 | 2030 | 2035 | 2040 | 2045 | 2050 |
Average target reduction in % | - 2% | - 6% | - 14,5% | - 31% | - 62% | - 80% |
Incentive for the use of renewable fuels of non-biological origin (RFNBOs)
Despite the technology-neutral approach, FuelEU Maritime provides a dedicated incentive for renewable fuels of non-biological origin (RFNBOs), which have a high potential to introduce renewable energy into the marine bunker fuel mix and achieve significant GHG emissions savings. The incentive consists of a multiplier of two that can be used to reward the ship for the use of RFNBOs until 2033 and a possible sub-target of 2% for such fuels from 2034 if the market share of RFNBOs is less than 1% by 2031[12]. The regulation also allows for using other fuels that provide equivalent GHG emissions savings and are certified accordingly.
Common principles and certification of fuels and emission factors
FuelEU Maritime lays down common principles for monitoring and reporting the amount, type and emission factor of the energy used on board by ships, as well as the procedures for verification and accreditation. The regulation also specifies the rules for the certification of fuels and emission factors, which are based on existing EU legal acts in the field of energy, such as Directive (EU) 2018/2001[13] on the promotion of the use of energy from renewable sources (biofuel). FuelEU Maritime does not allow the use of food and feed crop-based fuels, which have lower environmental benefits and broader sustainability concerns.
In the case of bio, zero and low-carbon fuels, that value will need to be certified. FuelEU Maritime introduces various means for companies to comply, the most straightforward one being burning a fuel that has a compliant GHG emission intensity[14]. In the case of bio, zero and low-carbon fuels, that value will need to be certified, by a 'FuelEU document of compliance'.
As per Article 3 (28) of the FuelEU Maritime, such document of compliance is a document specific to a ship, issued to a company by an accredited verifier, which confirms that that ship has complied with this regulation for a specific reporting period. The document of compliance under the FuelEU Maritime ensures that the fuels used meet the sustainability and GHG reduction criteria established by the EU Renewable Energy Directive (RED)[15]. RED introduces specific requirements for bunker delivery notes (BDNs) to enhance transparency and promote the use of renewable energy in shipping.
The BDNs must include detailed information, such as:
The specific type of renewable fuels used, such as biofuels, hydrogen, or e-fuels.
The percentage of renewable fuels included in the overall fuel mix.
Sustainability Certification: Certification details to verify the sustainability of the renewable fuel used.
Use of onshore power supply (OPS) during port stays in the EU/EEA
The Fuel EU Maritime imposes additional requirements for the energy used by ships at berth to reduce air pollution and GHG emissions in ports and coastal areas[16].
From 1 January 2030 the regulation requires containerships and passenger ships (>5,000GT) to connect to OPS[17] or use zero-emission technology in ports, when securely moored at berth, in all ports covered by the Alternative Fuels Infrastructure Regulation (AFIR)[18]. This obligation will also extend to all non-AFIR ports, as of 1 January 2035, for all ports that develop OPS capacity[19].
FuelEU Maritime also allows Member States to impose the same obligations on ships at anchorage and provides for the possibility to extend the obligations to other types of ships in the future.
Compliance
The entity responsible for ensuring compliance with FuelEU Maritime as per its Article 3 (13) should be the entity that is responsible for compliance of the ship with the International Safety Management Code (ISM Company). Given that the GHG intensity data is to be submitted via the THETIS-MRV platform it may be advantageous for the shipowners if the ISM company of the ship also carries out the MRV reporting responsibilities. Accredited verifiers will monitor, report and verify the data submitted by the ISM company as per the MRV Regulation and Article 7 of the FuelEU Maritime and ensure compliance.
FuelEU Document of Compliance
Article 22 of FuelEU Maritime demands that by 30 June of the verification period, the verifier shall issue a FuelEU document of compliance[20] for the ship concerned, provided that the ship does not have a compliance deficit further to the application of Articles 20 and 21, does not have non-compliant port calls[21] and complies with the obligation set out in Article 24 by holding a valid FuelEU document of compliance for every port call within the EU/EEA.
The FuelEU document of compliance shall be valid for a period of 18 months after the end of the reporting period or until a new FuelEU document of compliance is issued, whichever occurs earlier[22]. The verifier or, where applicable, the competent authority of the administering State shall record the issued FuelEU document of compliance in the FuelEU database without delay[23].
Sanction for non-compliance
The FuelEU Maritime ensures compliance by imposing a penalty[24] which then must be paid. The penalty factor grows by 10 percentage points if a shipping company does not comply for two years in a row. This penalty can be distinguished from a shipping company not complying with requirements set out under the regulation. In this regard, FuelEU Maritime requires EU Member States to lay down rules on sanctions applicable to infringements of the regulation pursuant to its Article 25 (Enforcement).
Banking and borrowing of compliance surplus between reporting periods
To provide for compliance and avoid sanctions, companies can either bank or borrow compliance surpluses between reporting periods. Article 20 of the FuelEU Maritime lies out the details under which conditions the company may bank a compliance surplus on its GHG intensity as referred to in Article 4(2) or, if applicable, on the RFNBOs sub-target as referred to in Article 5(3) to the same ship's compliance balance for the following reporting period.
The company shall record the banking of the compliance surplus for the following reporting period in the FuelEU database subject to approval by its verifier. The company may no longer bank the compliance surplus once the FuelEU document of compliance has been issued.
By 30 April of the verification period, the company shall record the advance compliance surplus, following approval by its verifier, in the FuelEU database.
However, where a ship does not have any EU port call during the reporting period and borrowed an advance compliance surplus in the previous reporting period, the competent authority of the administering State[25] shall notify by 1 June of the verification period[26] to the company concerned the amount of the FuelEU penalty as referred to in Article 23(2) that it initially avoided by means of borrowing that advance compliance surplus, multiplied by 1,1.
Pooling of compliance
In line with Article 21 of FuelEU Maritime shipowners have the option to pool their vessels' GHG intensity to keep them compliant. Pooling can include ships from different companies (ISM companies as well as shipowners), as long as they are verified by the same body[27]. Pooling provides flexibility in achieving compliance, especially for fleets that are in transition to using more renewable fuels[28]. It can be more cost-effective than retrofitting all ships immediately or facing penalties for non-compliance[29]. Ships that use renewable or low-carbon fuels can help balance out those that do not[30].
It is important that the total emissions of the pooled ships must result in a positive combined compliance balance (not exceeding 100%)[31]. For example, if one ship is at 120% compliance and another at 80%, the combined compliance is 100%, which is acceptable[32].
By 30 April of the verification period, the selected verifier shall record in the FuelEU database the definitive composition of the pool and allocation of the total pool compliance balance to each individual ship as per Article 21 no. 8 of the FuelEU Maritime.
Conclusion
Ahead of FuelEU Maritime's entry into force on 1 January 2024, Skuld is seeing an increasing flow of questions from shipowners about how the legal framework of the FuelEU Maritime works. Skuld encourages its members to familiarise themselves with the subject and ensure compliance by submitting the monitoring plan before the deadline expires on 31 August 2024. If you have any questions, please do not hesitate to reach out to your key Skuld contact.
[1] The FuelEU Maritime Regulation is the REGULATION (EU) 2023/1805 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 13 September 2023 on the use of renewable and low-carbon fuels in maritime transport, and amending Directive 2009/16/EC (Text with EEA relevance) - http://data.europa.eu/eli/reg/2023/1805/oj
[2] https://www.consilium.europa.eu/en/policies/green-deal/fit-for-55/
[3] Compared to greenhouse gas emission of 1990
[4] Article 3 (1) of the FuelEU Maritime Regulation
[5] Article 32 of the FuelEU Maritime Regulation
[6] Article 32 of the FuelEU Maritime Regulation
[7] Article 3 (13) of the FuelEU Maritime Regulation
[8] Article 3 (27) of the FuelEU Maritime Regulation
[9] Article 2 no. 1 of the FuelEU Maritime Regulation
[10] Until 31 December 2029 certain exceptions apply for port calls at ports in EU outermost regions and some EU islands including the cities of Ceuta and Melilla as per Article 2 nos. 3-6 1 of the FuelEU Maritime Regulation
[11] Article 4 of the FuelEU Maritime Regulation
[12] Article 5 of the FuelEU Maritime Regulation
[13] http://data.europa.eu/eli/dir/2018/2001/oj
[14] Article 3 (1) of the FuelEU Maritime Regulation
[15] Directive (EU) 2023/2413: http://data.europa.eu/eli/dir/2023/2413/oj
[16] Article 6 of the FuelEU Maritime Regulation
[17] Article 3 (1) of the FuelEU Maritime Regulation
[18] Article 6 no. 3 of the FuelEU Maritime Regulation
[19] Article 6 no. 10 of the FuelEU Maritime Regulation
[20] Article 3 (28) of the FuelEU Maritime Regulation
[21] Article 3 (10) of the FuelEU Maritime Regulation
[22] Article 22 no. 4 of the FuelEU Maritime Regulation
[23] Article 22 no. 5 of the FuelEU Maritime Regulation
[24] Article 23 of the FuelEU Maritime Regulation
[25] Article 3 (40) of the FuelEU Maritime Regulation
[26] Article 3 (42) of the FuelEU Maritime Regulation
[27] https://marine-offshore.bureauveritas.com/magazine/fueleu-maritime-pooling-explained
[28] https://www.dnv.com/news/fueleu-maritime-how-to-prepare-for-compliance/
[29] https://www.wartsila.com/insights/article/vessel-pooling-what-is-it-and-how-does-it-help-you-avoid-fueleu-maritime-penalties
[30] https://www.wartsila.com/insights/article/vessel-pooling-what-is-it-and-how-does-it-help-you-avoid-fueleu-maritime-penalties
[31] Article 21 no. 4 of the FuelEU Maritime Regulation
source: skuld.com
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