FuelEU Maritime

The regulation applies to commercial vessels with a gross tonnage of more than 5,000 used for transport of cargo or passengers, regardless of the flag, since 1 January 2025.  The first ship specific monitoring plans had to be submitted by August 2024.

FuelEU Maritime sets well-to-wake greenhouse gas (GHG) emission intensity requirements on energy used on board ships trading in the EU from 2025. The yearly average greenhouse gas (GHG) intensity of all energy used on board, measured as GHG emissions per energy unit (gCO2e/MJ), needs to be below a required level. The GHG emissions are calculated in a well-to-wake perspective, including emissions related to extraction, cultivation, production, and transportation of the fuel, in addition to emissions from energy used on board the ship.

The FuelEU Maritime will apply in respect of 100% of the energy used during calls at EU ports and on voyages between two EU ports (intra-EU) and 50% of the energy used on voyages between an EU and a non-EU port (extra-EU). The definitions of ‘voyages’ and ‘port calls’ mirror the terms in the ETS. A port call will qualify for the purposes of the regulation if cargo is loaded/unloaded or passengers are embarked/disembarked but not if it is a stop made solely to bunker, change crew or make STS-transfers outside ports.

The main reduction targets under the FuelEU Maritime are tied to a reference of the fuel intensity rating of the GHG emissions relative to the energy used onboard vessels. The baseline is 91.16 g CO2/eMJ based on the MRV data for voyages performed in EU 2020. Under the Regulation, vessels’ GHG intensity rating is to be reduced in steps, with a 2% reduction in 2025 and up to, ultimately, an 80% reduction by 2050.

Unlike the EU ETS, the company responsible for compliance with FuelEU Maritime is always the ISM company i.e. the Document of Compliance (DoC) holder, irrespective of whether the DoC holder is the registered owner, a bareboat charterer, or a third-party technical ship manager.

Article 3(13) of the Regulation states:

"company" means the shipowner or any other organisation or person such as the manager or the bareboat charterer, which has assumed the responsibility for the operation of the ship from the shipowner and has agreed to take over all the duties and responsibilities imposed by the International Management Code for the Safe Operation of Ships and for Pollution Prevention

The FuelEU Maritime introduces various means for companies to comply, the most straightforward one being burning a fuel that has a compliant GHG emission intensity. In case of bio, zero and low carbon fuels, that value will need to be certified, as required per EU regulations, by a Certificate of Compliance. According to the FuelEU Maritime, such Certificate will need to be added to the Bunker Delivery Notes (BDN).

Alternatively, a ship can bank some surplus it had in the current year, or borrow some surplus it expects to have the following year to handle any deficit although borrowing comes with an “interest” element and certain limits under Article 20 of the Regulation. Other options include pooling and paying (the penalty under the Regulation – see below) for compliance. 

If companies do not comply, they will have to pay a penalty under the Regulation. This essentially means that the Regulation allows a pay-to-comply mechanism. However, the penalty factor grows by 10 percentage points if a shipping company does not comply for two years in a row. This can be distinguished from a shipping company being in breach of requirements set out under the Regulation. In this regard, the Regulation requires EU Member States to lay down rules on sanctions applicable to infringements of the Regulation pursuant to Article 25.

The EU Commission had initially designed the FuelEU Maritime as a fuel and technology-neutral legislation putting all sustainable and non-sustainable fuels on equal footing. However, co-legislators decided to add mechanisms to support the uptake and to stimulate demand for renewable fuels of non-biological origin (RFNBOs). RFNBOs are synthetic fuels produced from renewable electricity and carbon captured directly from the air (for example, e-diesel, e-methanol, e-LNG). The decision was to mandate a 2% sub-target of RFNBO use from 2034 onwards and an incentive to use RFNBOs with a multiplier of 2 until 2034. Between 1 January 2025 to 31 December 2034, the use of RFNBOs will be incentivised with a “multiplier of 2” meaning that every tonne of RFNBO will count twice to the achievement of the overall GHG intensity targets used on board. Both instruments take advantage of the pooling system, which allows companies to exchange units of compliance between themselves.

If and under which circumstances RFNBOs (as well as biofuels) can be certified and so its more favourable emission factor is used, still needs to be clarified further at the EU level through secondary legislation.

From 1 January 2030, containerships and passenger ships (>5,000GT) are required to connect to onshore power supply (OPS) when securely moored at berth, in all ports covered by the Alternative Fuels Infrastructure Regulation (AFIR). Also, in all non-AFIR ports, as from 1 January 2035, for all ports that develop OPS capacity.

According to the FuelEU Maritime Regulation, the first Monitoring Plan (MP) needed to be submitted before 31 August 2024. Due to a delay with developing related implementing regulations (on the matter of the accreditation verifiers and monitoring plans), it has been acknowledged by the EU Commission that the deadline for companies to submit the first MP is approaching.

While the EU Commission is not in a position to extend the deadline, they note that they will be understanding and flexible with companies who submit MPs after this deadline. As it currently stands, the FuelEU Maritime Regulation does not impose any penalties for a failure to submit a MP in time.

There is no new official deadline or end date for the submission of MPs. It should, however, be noted that it is in the interest of companies to submit their MPs at their earliest convenience. Companies needed to start monitoring their ships from January 2024 based on their own MPs. Having MPs in place before January was therefore recommended to ensure that verifiers can start preparing the FuelEU Maritime reports covering the 2025 reporting period in good time.

We note that the delegated act for accreditation will be published only in October/November 2024. Due to this, the following temporary operational solution will apply: verifiers that hold an existing MRV/ETS accreditation and have applied for FuelEU accreditation will be permitted to verify the MPs. The list of these verifiers will appear in a drop-down menu of the FuelEU database, allowing companies submitting MPs to select them as verifiers for the purposes of FuelEU.

The process of incorporating the FuelEU Maritime into the EEA Agreement in Norway and Iceland has been delayed. Consequently, this delay means that Norwegian and Icelandic ports will be considered as third-country ports in the context of FuelEU Maritime from 1 January 2025 until the incorporation into the EEA Agreement is complete. Therefore, only half of the energy consumed between a port of call in Norway or Iceland and a port in the EU will fall under the scope of FuelEU Maritime during this period.

FuelEU Maritime Article 23(8) makes it clear that the regulated entity (the company) remains legally responsible for any FuelEU penalties. However, it also allows the company to enter into contractual agreements with the commercial operators of the ship. These agreements can enable the company to recover the cost of penalties from the commercial operator, where that operator is responsible for the purchase of fuel or the operation of the ship. If no FuelEU Maritime clause is incorporated into the contract, the company has no automatic recourse, and remains fully liable for compliance and any penalties incurred.
 
This contrasts with the EU ETS framework, where Article 3gc reinforces the “polluter pays” principle by placing an obligation on Member States to ensure that compliance responsibility lies with the party ultimately responsible for fuel purchase or ship operation. However, it remains unclear how this will work in practice—particularly if the parties fail to include an EU ETS cost allocation clause, or if the clause used does not meet the regulatory requirements. Further uncertainty arises from the fact that most maritime contracts are governed by English law, which may not fully align with the obligations under EU law.