FuelEU Maritime: requirements, compliance, penalties...

For ships trading in the EU, the EU’s legislative bodies have reached an agreement on the FuelEU Maritime regulation setting well-to-wake GHG emission intensity requirements on energy used on board from 2025.

From 2030, the regulation also mandates the use of shore power for container and passenger ships in certain EU ports.

This article from DNV published on 16 May 2023 is relevant for ship owners, managers, charterers and fuel suppliers.

European Parliament (EP), the Council of the European Union, and the European Commission (EC) have reached an agreement on the FuelEU Maritime regulation, with the objective to increase the share of renewable and low-carbon fuels in the fuel mix of maritime transport in the EU.

The EP and the Council are expected to formally adopt the regulation later this year.

Further details on the requirements and processes can be expected as the final text is adopted and the EC finalizes related implementing and delegated acts.

FuelEU Maritime requirements

GHG intensity

From 2025, for ships trading in the EU/EEA, the yearly average GHG intensity of energy used on board, measured as GHG emissions per energy unit (gCO2e/MJ), needs to be below a required level.

In addition to emissions from the use on board the ship, the GHG emission are calculated in a well-to-wake perspective, including emissions related to the extraction, cultivation, production and transportation of the fuel.

The regulation includes provisions for crediting ships using wind-assisted propulsion.

The GHG intensity requirements are set as a percentage reduction relative to a reference value of 91.16 gCO2e/MJ.

The percentage reduction requirement increases gradually every five years to 2050 – meaning, for example, that it stays at 2% from 2025 to end-2029.

Use of shore power

From 2030, container ships and passenger ships are required to connect to shore power for all electrical power demand, when at berth for more than two hours in a Trans-European Transport Network (TEN-T) port.

From 2035, the requirement applies to all ports where shore power is available.

The electricity supplied to the ship from shore is also included for the calculation of the annual GHG intensity, but can be reported as zero well-to-wake GHG emissions initially.

Use of renewable fuels

The FuelEU Maritime regulation does not initially set requirements on the use of renewable fuels of non-biological origin (RFNBOs), but sets their use as an additional incentive: use of such fuels counts as double the energy used.

If the total share of RFNBOs in shipping in EU is below 1% in 2031, a separate use requirement will be added from 2034.

Scope

Ship types and sizes

The FuelEU Maritime regulation applies to ships above 5,000 GT transporting cargo or passengers for commercial purposes, same as the present MRV coverage.

Greenhouse gases (GHGs)

The regulation includes carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) emissions calculated as CO2 equivalents using a Global Warming Potential of 100 years (GWP100), whereby 1 tonne of methane equals 28 tCO2e and 1 tonne of N2O equals 265 tCO2e.

Voyages

The GHG intensity requirement applies to 100% of energy used on voyages and port calls within the EU/EEA, and 50% of energy used on voyages into or out of the EU/EEA.

To avoid evasive behaviour, container ships stopping in transhipment ports outside the EU/EEA but less than 300 nautical miles from an EU/EEA port, need to include 50% of the energy for the voyage to that port as well, rather than only the short leg from the transhipment port.

The EU will provide a list of transhipment ports.

Exemptions and derogations

Several exemptions are provided to address the specific situations of ice-classed ships, outermost regions, small islands (under 200,000 permanent residents) as well as areas economically highly dependent on their maritime connectivity.

Fuel emission factors

The FuelEU Maritime regulation defines default well-to-tank and tank-to-wake emission conversion factors for various fuel types, production pathways and onboard energy converters.

Fossil fuels must use the default values for well-to-tank GHG emissions and for tank-to-wake CO2 emissions but can use actual values for tank-to-wake CH4 and N2O, certified by means of laboratory testing or direct emissions measurements.

Biofuels, RFNBOs and recycled carbon fuels (RCF) fulfilling the sustainability and GHG emissions-saving criteria (70% reduction from current fossil fuels) under the EU’s Renewable

Energy Directive (RED) can use certified actual values for both well-to-tank and tank-to-wake.

The actual well-to-tank values must be certified by a scheme recognized by the EC. Fuels not meeting the GHG-saving criteria, non-sustainable biofuels, and biofuels from food or feed crops are considered fossil fuels and have to use the default factors for the fossil fuel of the same type.

For non-fossil fuels, additional information will be required to accompany the Bunker Delivery Note (BDN), including evidence of compliance with the sustainability criteria certification and the GHG intensity.

Compliance process

Reporting and verification

The energy use and emissions will be reported and verified through a scheme which is separate from the existing EU Monitoring, Reporting and Verification (MRV) system.

However, elements from the MRV regulation can be reused for the purpose of the FuelEU Maritime regulation.

The requirements apply to the shipping company which is the shipowner or any other organization or person, such as the manager or the bareboat charterer, who has assumed the responsibility for the operation of the ship including duties and responsibilities imposed by the ISM Code.

Each company will need to be registered with an administering authority, which is the same as for EU ETS compliance.

In the event of a change of company, it is the shipping company having the responsibility on 31 December in any given year that is responsible for compliance for the whole calendar year.

However, previous companies are required to report and verify energy use and emissions as soon as possible after the changeover.

Banking and borrowing of compliance surplus

If a ship has an average GHG intensity below the requirement, the surplus emission amount (compliance surplus) can be banked for use in the subsequent compliance period.

Similarly, a ship can borrow advance compliance surplus from a subsequent period, limited to 2% and only for two consecutive periods, and with a 10% penalty on the borrowed compliance surplus for the subsequent period.

Pooling of compliance

The compliance balance can be pooled for two or more ships, and the requirement applies to the total GHG intensity of the ships in the pool.

The pool is not limited to ships of the same company.

Monitoring plan

By 31 August 2024, a monitoring plan needs to be submitted to a verifier, describing the method for monitoring and reporting of the data required under this regulation.

This plan comes in addition to the current MRV Monitoring Plan, but elements can be reused.

Penalties

Ships that have a higher GHG intensity than the requirement. must pay a penalty corresponding to its compliance deficit, measured as the difference between the required and actual GHG intensity, multiplied by energy use.

The penalty is progressively increased if the ship has a compliance deficit for two or more consecutive reporting periods.

The compliance deficit is calculated into energy based on the actual GHG intensity of the ship, applying a penalty of €2,400 per tonne VLFSO energy equivalent, or about €58.50 per GJ of non-compliant energy use.

The penalty for not complying with the shore power requirements is €1.50 per kWh of the established total electrical power demand of the ship at berth multiplied by hours at berth.

The revenues from the penalties should be used by member states to promote the distribution and use of renewable and low-carbon fuels in the maritime sector and help maritime operators to meet their climate and environmental goals.

LINK TO THE ORIGINAL ARTICLE

MORE DNV'S TECHNICAL AND REGULATORY NEWS IS AVAILABLE HERE