Preparing for FuelEU Maritime
Preparing for FuelEU Maritime
FuelEU Maritime – part of the EU’s Fit for 55 package – will apply from 1 January 2025 to commercial vessels over 5,000GT used for the transport of cargo or passengers, regardless of their flag. It is imperative that shipowners, charterers, shipmanagers and fuel suppliers prepare for FuelEU Maritime, in respect of both its practical and contractual implications.
What is FuelEU Maritime?
The EU’s Fit for 55 package aims to reduce the EU’s net greenhouse gas emissions by at least 55% by 2030. As part of this package, FuelEU Maritime focuses upon the greenhouse gas (GHG) emission intensity of energy used onboard ships trading in the EU, or EEA, measured on a well-to-wake basis. This will include emissions relating to extraction, cultivation, production, and transportation of the fuel, as well as the emissions from the ship itself. Vessels are already required to monitor and report methane, nitrous oxide, and carbon dioxide emissions. Under FuelEU Maritime, the yearly average GHG intensity of all energy used on board is calculated as GHG emissions per energy unit (gCO2e/MJ) and, for a vessel trading in the EU / EEA, will need to be below a required level. Calculations will be set relative to 2020 reference levels. In 2025 the reduction target will be 2%, increasing to a reduction target of 6% in 2030, 14.5% in 2035 and then reaching 80% by 2050.
Scope of FuelEU Maritime
FuelEU Maritime will apply to:
Energy used by a vessel during its stay within an EU / EEA port.
100% of the energy used on voyages from one EU / EEA port of call to another EU / EEA port of call.
50% of the energy used on a voyage from / to a port of call located in an outermost region under the jurisdiction of a Member State.
50% of the energy used on voyages from an EU / EEA port of call to a non-EU / EEA port of call (and vice versa).
For the purpose of the FuelEU Maritime regulations, a ‘port of call’ is a port where cargo is loaded / unloaded or passengers are embarked / disembarked. Excluded from the definition of a ‘port of call’ are stops made solely for bunkering, obtaining supplies, relieving the crew, going into dry-dock or making repairs to the vessel, its equipment (or both); stops in port because the vessel is in need of assistance or is in distress; ship-to-ship transfers carried out outside of port limits; stops for the sole purpose of taking shelter from adverse weather; and stops of containerships in a neighbouring container transhipment port. In respect of neighbouring container transhipment ports, the European Commission is to adopt implementing acts by 31 December 2025 (to be updated every two years) establishing a list of these ports.
Emissions at berth and Onshore Power Supply
Passenger ships and container ships will be required to connect to onshore power supplies (OPS) at major EU ports from 2030 and all EU ports with OPS from 2035. This will not apply to short stays (of less than 2 hours) or if the vessel uses zero-emission technology whilst at berth.
Use of Renewable Fuels of Non-Biological Origin (RFNBOs)
RFNBOs, or e-fuels, are synthetic fuels produced from renewable electricity and carbon captured directly from the air (for example e-diesel, e-methanol, e-LNG, e-hydrogen, e-ammonia). The use of RFNBOs between 1 January 2025 to 31 December 2033 will be incentivised, with a reward factor of 2x in the calculation of the GHG intensity of energy used on board.
Who is responsible for FuelEU Maritime?
FuelEU Maritime differs from the EU ETS in that the responsible entity is always the ISM Company (i.e. the Document of Compliance holder). This may, therefore, be the registered owner, a bareboat charterer or a third-party shipmanager, so long as they are the DOC holder. Article 3(13) of Regulation 2023/1805 defines the responsible ‘company’ as follows:
"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
Key Dates
31 August 2024 – ship-specific monitoring plans need to be submitted to verifiers for assessment by this date. The monitoring plan template is included in the Annex to Implementing Regulation (EU) 2024/2031 (Implementing regulation - EU - 2024/2031 - EN - EUR-Lex (europa.eu)).
1 January 2025 onwards – based on the monitoring plan for the vessel, the company will need to record on an annual basis (1 January to 31 December) the required fuel information (and its well-to-wake emission factor). Individual ship’s FuelEU reports will need to be submitted to the verifier by 31st January of each year.
31 March 2026 (and each subsequent year) – the date by which the verifier is to have reported to the company the information that needs to be recorded in the FuelEU compliance database.
30 April 2026 (and each subsequent year) – by this date the company shall record any advance compliance surplus and the verifier must record any use of a pool in the FuelEU compliance database.
30 June 2026 (and each subsequent year) – the verifier is to issue a FuelEU certificate of compliance. A valid certificate of compliance will need to be carried by ships entering an EEA port. Any penalties will also need to be paid to the relevant Administering Authority by this date.
1 January 2030 – from the start of 2030, container and passenger ships calling at major TEN-T (Trans-European Transport Network) ports will need to connect to OPS to meet zero-emission at berth requirements. There are exceptions to this requirement, including where zero-emission technology is used onboard whilst at berth, and this will not apply to short stays (of less than 2 hours).
1 January 2035 onwards – passenger ships and container ships calling at all EU / EEA ports to connect to OPS.
Penalties for non-compliance
If a shipping company does not meet their compliance obligations in respect of GHG intensity, then they will have to pay a penalty. Should a shipping company fail to comply for two or more consecutive years, then the penalty factor will be multiplied using a formula set out in the regulations.
There will also be financial penalties for any contraventions in respect of the use of OPS whilst in port. Furthermore, failure to present a FuelEU Maritime certificate of compliance for two or more consecutive reporting periods could result in a ship being banned from the EU.
Contractual Implications
Shipowners, Charterers and shipmanagers should consider carefully how FuelEU Maritime is dealt with contractually in their charter parties, shipmanagement agreements and bunker supply contracts.
(i) Monitoring, reporting and verification requirements
As set out above, the ISM Company will be the entity responsible for compliance. The parties may wish to include within their contracts terms to the effect that the responsible entity will comply with all of their responsibilities, particularly in respect of monitoring, reporting and verification.
(ii) Documentation and data
From an owners’ (or shipmanagers’) perspective, provisions should also be included in a charter party (or shipmanagement agreement) requiring information and data from the party responsible for providing fuel to the vessel, not only in a timely manner, but also for such information and data to be accurate and compliant with the FuelEU Maritime regulations. This will need to include provision in respect of proof of sustainability documentation or certification, and what information is to be included in a bunker delivery note.
Bunker supply contracts should also be considered carefully by the party who is responsible for purchasing fuel, to ensure that the requisite information and documentation is obtained from the bunker suppliers. This is important as this documentation will need to be passed on to the verifiers to evidence the fuel which has been stemmed (in order that the correct GHG energy intensity can be calculated). In the absence of the required documentation, the emission factor given may be the corresponding fossil fuel factor (Annex II of the FuelEU Maritime regulations contains default emission factors).
(iii) Penalties and / or expulsion or detention orders
Parties may wish to allocate the cost of compliance with FuelEU Maritime under their charter arrangements (or, in other words, the payment of the FuelEU Maritime penalty in order to obtain the FuelEU Document of Compliance should there be a compliance deficit).
In the context of a time charter party, clear provision will need to be made within the charter party as to responsibility for the cost of FuelEU penalties and / or expulsion or detention orders. However, as penalties are based on yearly limits and will not actually fall due until the June of the following year, the situation will be complicated if charterers only have the vessel on charter for part of a year, or if the charter party spans more than one reporting period. In that situation the parties may prefer to estimate or calculate the apportionment of penalties for more regular periods.
In respect of a voyage charter, the cost of compliance with FuelEU Maritime could be allocated through an increased freight rate which takes into account, for example, additional fuel costs or by way of a surcharge.
(iv) Pooling, Banking and Borrowing
Consideration will also need to be had as to whether there will be any pooling, banking or borrowing of a vessel’s compliance balance and, if so, how this may interplay with a charterers’ obligations under the charter party. The parties will need to consider whether charterers will get the full benefit of compliance pooling, banking or borrowing, and how will this work where the charter party does not cover the full reporting year.
For example, will charterers receive any benefit or incentive where a compliance surplus is banked but they will not be the charterers of the vessel for the following reporting period? A vessel’s compliance balance may not be included in more than one pool in the same reporting period, but the vessel may be switched to a different pool in a different reporting period, so consideration may be needed as to how this will be dealt with contractually. It may be that the parties choose to include a provision within the charter party which allows for re-imbursement (either in whole or pro-rated) if payment is made by charterers under the charter party in anticipation of a FuelEU penalty becoming due but, as a result of pooling or borrowing by the owners, no FuelEU penalty is in fact required to be paid (or it is of a lesser amount).
(v) Onshore Power Supply
For passenger and containerships, Owners will need to consider the vessel’s readiness for OPS and whether this will have any implications on their obligations under long-term charter parties should the vessel need to be taken out of service for any modifications to the vessel to be carried out.
Club Assistance
If our Members or their brokers require any assistance in respect of FuelEU Maritime, contact your usual FD&D claims handler for contractual enquiries, or you can contact NorthStandard’s Decarbonisation Expertise Group via email NSdecarbonisation@north-standard.com
