FuelEU Maritime Regulation: What you need to know

SQE MARINE consulting company issued circular to explain that all argets set by the Regulation aim to ensure that the greenhouse gas intensity of fuels used in the sector will gradually decrease over time, starting with a 2% decrease by 2025 and reaching up to an 80% reduction by 2050.

These targets will become more ambitious over time to stimulate and reflect the necessary developments in technology and the uptake in production of renewable and low-carbon fuels. The targets cover not only CO2 but also methane and nitrous oxide emissions over the full lifecycle of the fuels used onboard, on a Well-to-Wake (WtW) basis.

The regulation will be applicable to vessels with a gross tonnage (GT) exceeding 5000, regardless of their flag state, when they are involved in the commercial transport of passengers or cargo and call at EU/EEA ports.

In terms of calculating GHG intensity, the FuelEU regulation includes the following:

1. 100% of the energy is used by ships at EU / EEA ports.
2.  50% of the energy used by ships for voyages performed between EU/EEA ports and non-EU/EEA ports, and vice versa.
3. 100% of the energy is used by ships for voyages between two EU/EEA ports.

FuelEU Maritime regulation has set an energy usage limit for ships on board, with a reference value of 91.16 grams of CO2 equivalent per megajoule (MJ). This reference value is set to undergo periodic reductions until the year 2050.

Specific requirements of FuelEU Maritime:

Fuel EU database

A FuelEU database will be established by the Commission to maintain records of various aspects related to regulatory compliance. This database will include information about:

1. Verification activities and related actions.
2. The compliance status of individual ships.
3. The utilization of flexibility mechanisms such as banking, borrowing, and pooling of allowances.
4. Actions pertaining to FuelEU penalties.

Access to the FuelEU database will be granted to relevant companies, including the ones responsible for compliance (which can be shipowners or other entities like managers or bareboat charterers who have assumed responsibility from the shipowner), verifiers, National Administrators (NABs), Competent Authorities, and the European Maritime Safety Agency (EMSA).

Compliance balance

This regulation serves as a measure for the over or under-compliance which is computed by comparing with the allowed limits of average GHG intensity of the energy used on board by a ship or the RFNBO sub-target.

Banking and borrowing of compliance balance

The compliance surplus, which is determined based on GHG intensity for a specific reporting year, can be carried forward to the compliance balance for the following year for the same ship. Conversely, in the event of a compliance deficit, the company will have the option to borrow an equivalent amount from the upcoming reporting year’s anticipated compliance surplus.

However, it’s important to note that if a company borrows a compliance surplus, an amount equal to 1.1 times the borrowed balance must be subtracted from the compliance balance of the subsequent reporting year. This provision is designed to ensure that borrowed compliance surpluses are eventually repaid with a slight penalty.

Pooling of compliance

Ships from one or more companies have the option to form a pool to collectively work towards meeting the GHG intensity targets. It’s important to note the following rules regarding these pools:

1. A ship’s compliance balance can only be part of one pool, not multiple pools simultaneously.
2. The compliance balance of a pool in any given reporting year is considered valid only if it is in a positive compliance state, meaning it meets or exceeds the required standards.
3. The Fuel EU database is utilized to keep a record of how the total compliance balance of a pool is allocated to each individual ship within that pool, along with the associated verifier responsible for verifying their compliance.

Penalties for non-compliance

The Verifier is responsible for recording the verified compliance balance of both the GHG intensity and the sub-target for Renewable Fuels of Non-Biological Origin (RFNBO) in the FuelEU database.

In cases where a ship falls into a compliance deficit, the penalties will be calculated as per the formula outlined in the regulation.

Furthermore, if a company fails to submit the penalty for two or more consecutive years, the penalty amount shall be multiplied by a factor of 1 + (n-1)/10, where ‘n’ represents the number of consecutive years without penalty payment.

In addition to penalties, ships can also face an expulsion order, which could lead to further consequences or actions by the regulatory authorities.

Monitoring & Reporting

If a shipping company did not meet the GHG intensity limit or there was a non-compliance with the use of OPS, the necessary amount of the penalty should be paid by this date. Upon the confirmation that the penalty has been paid, the shipping company will receive a FuelEU Document of Compliance issued by the competent authority.

Actions required

All vessels over 5,000gt trading to/from EU ports are required to carry on board a FuelEU Maritime monitoring and reporting plan that has been reviewed and assessed by an independent verifier.

By 31 August 2024, the FuelEU Maritime 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 part of this can be reused.

Vessels trading in the EU/EEA countries shall have the approved FuelEU Maritime Monitoring Plan on board before 1 January 2025.

By 31 January 2026 (thereafter, by 31 January every year), the data and information that are recorded for the previous reporting year should be submitted to the verifier as FuelEU Report for each ship. Subsequently, the report submitted will be assessed by the verifier by 31 March and recorded in the FuelEU database.

By 30 April 2026 (thereafter, by 30 April every year), Shipping company can record banking, borrowing and pooling, as necessary, on the FuelEU database after the FuelEU Report is verified and recorded in the FuelEU database by the verifier, no later than 30 April.

By 30 June 2026 (thereafter, by 30 June every year), Based on the information recorded in the FuelEU database, the shipping company receives a FuelEU Document of Compliance of the ship, issued by the verifier, if the shipping company meets both the provisions of the GHG intensity and the use of OPS, i.e., in case no need to pay a penalty.