What is FuelEU Maritime Regulation and its objective? What is the timeline introduced by the regulation?

Fuel EU Maritime is one of the ambitious instruments of European Union under “Fit for 55” package as “Regulation EU 2023/1805 on the use of Renewable and low carbon fuels in maritime transport “ regulatory frame work to be in force from 01 Jan 2025 for ships of 5000 GT and above.

Main obligation under FuelEU Maritime Regulation for vessels calling EU ports:

• Reduction in Green House Gas (GHG) emissions: There are specific targets for reduction of the yearly average GHG intensity of the energy used on board by ships, set in 5-year steps, ranging from 2% in 2025 to 80% in 2050.

Reduction in GHG Intensity of energy used on board 2020 levels (%)

• Mandatory Use of Alternative Power Sources in Ports. From 01 Jan 2030, Container ships and Passenger Ships arriving departing EU/EEA berths for halt more than 02 hours must use either on-shore supply (OPS) or zero-emission technologies while at berth.

Which ships fall under the scope of FuelEU Maritime Regulation?

The regulation applies to all commercial ships above 5000 GT, that are engaged in transporting passengers or cargo, irrespective of their flag.
It does not apply to:

• Warships & Naval Auxiliaries
• Fishing Vessels
• Wooden Ships of Primitive Build
• Offshore Ships
• Ships not propelled by mechanical means
• Ships owned and operated by Governments for non-commercial use

What distinguishes EU ETS, EU MRV and Fuel EU?

FuelEU Maritime is another measure complementing the EU ETS system to achieve climate targets. Unlike the other measures, the FuelEU Maritime regulation focuses on types of energy used on board and looks at life cycle emissions, aiming to boost the use of alternative fuels and innovative technologies. Flexibility mechanisms such as pooling, borrowing and banking differentiate the regulation from the EU ETS / EU MRV scheme.

In essence, the EU ETS regulates emissions through a cap-and-trade system, the EU MRV ensures accurate emissions reporting for ships, and FuelEU Maritime promotes cleaner fuel usage in the maritime sector with added flexibility mechanisms to support compliance.

Are separate monitoring plans required for EU ETS and FEUM?

Yes, two distinct sets of required Monitoring Plan elements for MRV and FuelEU necessitate the submission of two separate Monitoring Plans that meet the requirements of both regulations. The FuelEU monitoring plan is to be submitted by 31 Aug 2024.

However, once these Monitoring Plans are uploaded to the FuelEU database, they will enable complementary submission of relevant data for both MRV/ETS and FuelEU. All data monitored and recorded under MRV will be utilized for FuelEU calculations, pending confirmation by the FuelEU Verifier, who may differ from the MRV Verifier.

What do ‘Well to Tank’ and ‘Tank to Wake’ emissions refer to?

‘Well to Tank’ emissions encompass the environmental impacts associated with extracting, cultivating, producing, and transporting fuels. On the other hand, ‘Tank to Wake’ emissions refer to the emissions generated from fuel consumption onboard ships and slip emissions, as described in Regulation EU (2023/1805), Annex I of the FEUM Regulation.

Who is responsible for ensuring compliance with the FEUM regulations, and how does this responsibility differ from ETS compliance?

Definitions provided in the amended Regulation MRV ETS 2015/957 and FEUM Regulation EU 2023/1805, although similar, the responsibilities differ. Under EU ETS, the ultimate liability for compliance rests either with the Registered Owner or with the ISM company through a specific mandate in place. In contrast, under FEUM regulations, the responsibility for compliance lies with the ISM company, specifically the Document of Compliance (DOC) holder of the ship.

What is the reporting period according to FEUM, and who is responsible for compliance in case of a change of company during the reporting period?

The reporting period under the FEUM Regulation aligns with the MRV Regulation, spanning from January 1st to December 31st each year, during which the shipping company is responsible for compliance.

In the event of a change in the shipping company during a reporting period, the previous company must submit all FEUM-related data and documentation to the verifier for partial verification within one month of the change. The verified data will be recorded in the Fuel EU database for the period corresponding to the reporting company’s responsibility. However, the ultimate responsibility for compliance rests with the company that is operating or managing the ship as of December 31st of that reporting year.

How does the regulation apply to different type of voyages in and out of EU?

The Regulation applies differently to voyages as follows:

Intra-EU Voyages: Entire (100%) energy used on voyages between ports under the jurisdiction of Member States.
Voyages to or from Outermost Regions: For voyages that start or end in an outermost region under the jurisdiction of a Member State, the Regulation applies to ships for one half (50%) of the energy used.
International Voyages: For voyages between a port under the jurisdiction of a Member State and a port under the jurisdiction of a third country (or vice versa), the Regulation applies to ships for one half (50%) of the energy used.

What are the compliance steps for Shipping Companies wrt to FEUM compliance?

What additional information must be reported along with EUMRV data for FEUM compliance regarding fossil fuels and alternative fuel consumptions?

For FuelEU compliance, additional information must be reported alongside the EUMRV data. This includes:

Well-to-Tank Emission Factor: The emission factor representing the emissions associated with the production and transportation of the fuel.

Low Calorific Value (LCV): The amount of energy produced by the combustion of a specified quantity of fuel.

Onshore Power Supply (OPS) Details: Information about the electricity demand from the ship while using OPS, including the duration and the amount of electricity supplied.

These emission factor and LCV values are predefined in Annex II of the FEUM Regulation and Annex III of Directive (EU) 2018/2001. However, for biofuels and Renewable Fuels of Non-Biological Origin (RFNBOs), if predefined LCV values are not available, supplier-provided values should be used instead.

What are the consequences of non-compliance with the FEUM Regulation (EU 2023/1805)?

Failure to comply with the requirements of the FEM Regulation (EU 2023/1805) results in several repercussions:

• The Document of Compliance (DOC) will not be issued to the ship.
• If non-compliance persists into the following year and the company has not implemented corrective measures, the competent authority of the EU/EEA member state where the ship has entered port (assuming the ship does not fly the flag of that member state) may issue an Expulsion Order. This order notifies all member states to refuse entry of the ship into any of their ports until compliance is achieved.
• If the ship flies the flag of the concerned member state, the competent authority may issue a Flag Detention order, which detains the ship’s flag until the company fulfils its compliance obligations.

What is Compliance Surplus or Deficit, and how long does it remain valid?

Compliance Surplus or Deficit is determined by comparing the target greenhouse gas (GHG) intensity value set for a reporting period with the actual GHG intensity value averaged over the energy used onboard during that period. A Compliance Surplus occurs when the actual GHG intensity is lower than the target value, indicating an excess compliance beyond the requirement. Conversely, a Compliance Deficit arises when the actual GHG intensity exceeds the target value.

It is used to assess whether the ship has met or exceeded the regulatory requirements for GHG emissions intensity during that reporting period.

Compliance balance for ship wrt GHG Intensity of energy used is estimated as per Annex IV

Compliance balance for ship wrt to sub targets of RFNBOs as defined in Annex IV

Compliance Surplus or Deficit remains valid into the following year, especially when considering compliance mechanisms such as Banking and Borrowing. Banking refers to carrying forward a Compliance Surplus from one reporting period to offset future deficits, while borrowing allows a company to cover a Compliance Deficit by borrowing against future Compliance Surpluses. However, Pooling for Compliance balance is limited to the reporting period only.

In the event of a change in company ownership, any existing Compliance Surplus (Banking) or Deficit (Borrowing) remains associated with the ship. Therefore, it is crucial for the involved parties to establish prior agreements to manage these compensatory matters effectively.

What is Banking and Borrowing?

Banking: If for a specific reporting period, the ship has positive compliance balance, i.e. if the calculated GHG intensity for the energy used onboard is higher than the required, the company may bank this compliance surplus to the following reporting period in the FuelEU database. Banking can take place in one, two or more successive years.
Banked compliance surplus does not expire, it gets carried with the ship.

Borrowing: If, for a specific reporting period, a ship has a compliance deficit (i.e. if the calculated GHG intensity for the energy used onboard is higher than the required), the company is allowed to borrow an advance compliance surplus of the corresponding amount from the subsequent future reporting period. This advance compliance surplus, borrowed from the next reporting period, must be of an exact amount corresponding to the compliance deficit calculated. In the accounts, borrowing is handled as follows: The deficit of the reporting period is balanced by means of the advance compliance surplus stemming from the subsequent reporting period, while the borrowed surplus plus a surcharge of 10% will be subtracted from the same ship’s compliance balance of the subsequent reporting period

What is Pooling? How does it work?

Pooling is a flexibility mechanism in FEUM that allows the over-compliance of one ship to compensate the under-performance of other ships, provided that the total pooled compliance is positive.

• A ship’s compliance balance may not be included in more than one pool in the same reporting period.
• To establish a pool, a company must inform or register its intention in the FuelEU database which must be technically confirmed by the FuelEU database.
• Pool details, including verifier selection, must be validated by all participating companies.
• Pooling option is available for all ships covered under the scope of the regulation, irrespective of ship type and size.
• Pool composition compliance can include vessel from different companies which can undergo verification of their individual compliance balance from their dedicated verifiers, but the whole Pool compliance shall be verified by one main verifier.

Does Pooling of Compliance guarantee No Penalties?

Pooling does not guarantee that individual ships do not pay a penalty – one can assign the compliance balance to each ship in different ways, ending up with deficits on some vessels and surpluses on others. Allocation of compliance is decided by pool members and needs to follow three basic rules:

• The total pool compliance balance must be positive
• Ships with a deficit before pooling do not have a higher deficit after pooling
• Ships with a surplus before pooling do not have deficit after pooling

If Pooling, does vessel need to be in the same pool next year?

Surplus units are assigned to individual ships based on the actual GHG intensity of the energy used on board and through the reallocation of surplus units among ships in a pool. However, a ship is not required to join the same pool the following year. The surplus can be shared within a different pool.

How is the penalty determined?

The FuelEU Maritime Regulation in ANNEX IV B. outlines the formula for calculating the penalty for non-compliance with GHG intensity targets.

FuelEU Penalty = Compliance Balance X 2400 / GHGIE actual X 41000

The penalty is determined by multiplying the following three factors:

i) Ship’s Total Energy Consumption: The total energy consumption of the ship during the reporting period, measured in megajoules (MJ).

ii) Amount of Money per MJ Energy Consumed: The cost assigned per megajoule of energy consumed.

iii) GHG Intensity Compliance Deficit: The percentage by which the actual GHG intensity should have been reduced to meet the GHG intensity target.

Which authority is responsible for collection of penalty & How are the penalties to be paid to in case of non-compliance for FEUM?

The company is required to pay the penalty by June 30th of the verification period.
The administering state is responsible for ensuring that the penalty is paid, regardless of any contractual agreements the company may have with commercial operators or fuel suppliers regarding liability.

The administering states will decide on the method for collecting the penalty.

Who pays the penalty in FEUM?

The company defined as in the regulations will be the responsible entity to pay the penalty. The ISM company or DOC holder will be the responsible entity wrt FuelEU Maritime, without prejudice to the possibility for the company to conclude contractual agreements with the commercial operators to reimburse the company for the payment of FuelEU penalties.

What are the consequences of failing to pay a penalty?

According to Article 25 of the FuelEU Maritime Regulation, failing to comply with penalties can lead to serious repercussions, such as:

Expulsion from Ports: The ship may be expelled from ports, barring its entry and use of port facilities.
Flag Detentions: The ship may be detained by the flag state, preventing it from operating until compliance is achieved.
Restricted Access to Ports in Multiple Member States: The ship could face restricted access to ports in several Member States, significantly limiting its operational capabilities and access to essential services.

These measures highlight the critical importance of adhering to the FuelEU Maritime Regulation and ensuring timely payment of penalties to avoid significant operational disruptions.

What are the considerations for Ice class ships in FuelEU Maritime regulation?

For any ship having Ice class IA Super or IA, IB, IC or an equivalent ice class, the company may request, until 31 December 2034, to exclude the additional energy consumption, due to sailing in ice conditions.

For ships having the Ice class IA Super or IA or an equivalent ice class, the company may request to exclude the additional energy consumption, due to the technical characteristics of the ship. Additional energy consumption is allocated to different fuel types to calculate the adjusted mass of fuel consumption. Voyages within ice edge must be properly marked to get these exemptions,

What are the exceptions for requirements to connect to shore power during port stays?

Ships do not require to connect to shore power during port stays in following cases:

• Port stays shorter than two hours
• Unscheduled port calls related to safety or saving life at sea
• Unavailability of OPS connection points in a port
• Risk to electrical grid stability due to insufficiently available shore power
• Incompatibility with onshore power equipment, provided that the ship’s installation is certified in accordance with the technical specifications set out in Annex II of Regulation (EU) 2023/1804
• Force majeure scenarios such as emergency situations representing immediate risk to life, the ship, or the environment
• When maintenance tests or functional tests, carried out for a limited period for survey or inspection purposes, require the use of on-board energy generation.

What information is to be submitted to verifier if bio-fuel blend or RFNBOs are used?

For biofuels, lower calorific values, and well-to-wake GHG intensity are not standardized and should be included in the reporting to verifier.

For renewable fuels of non-biological origin (RFNBOs), well-to-wake GHG intensity is not standardized and should be included in the reporting to verifier. Suppliers are required to provide well-to-tank GHG emission factors and related certificate identifying the fuel procustion pathway.

Lower calorific values for such fuel types are pre-defined in Annex II of the FuelEU regulation. Proof of sustainability (PoS) should be seeked from supplier.

Can ships allocate renewable and low carbon fuels through their entire journey, and allocate these fuels in the calculation of GHG intensity?

All renewable and low-carbon fuels that meet the criteria specified in FuelEU Article 10, and are used during international voyages, contribute to the GHG intensity of half the energy used during those voyages. This applies up to the maximum energy amount defined under FuelEU Maritime Article 2(1)(d).
Similarly, this provision applies to such fuels used on voyages arriving at or departing from a port of call located in an outermost region under the jurisdiction of a Member State, as outlined in FuelEU Article 2(4).

Although fuel consumption must be reported on a “per voyage” basis, the calculation of the average yearly GHG intensity of the energy used onboard is based on the total mass of fuel used per energy consumer over the course of the year.

Examples of Renewable and Low-Carbon Fuel Usage under FuelEU Maritime Regulation
Use of Bio-Blend B30 (30% biodiesel + 70% fossil diesel):
The entire biodiesel fraction (30% of the blend) can be counted towards the energy used during an international voyage.

Use of Bio-Blend B60 (60% biodiesel + 40% fossil diesel):
A portion of the biodiesel fraction (up to 60% of the blend) can be counted towards the energy used during an international voyage, but only up to the maximum energy amount specified under the scope of the Regulation.

This is an illustration how different proportions of biodiesel in bio-blends can be counted towards the GHG intensity targets during international voyages, in accordance with the FuelEU Maritime Regulation.