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2025.01.29
FuelEU Maritime: Transforming Shipping to Achieve Decarbonization
Understanding and Navigating the Impact of EU Maritime Regulations for Shippers
The maritime shipping industry is experiencing a significant transformation with the introduction of the European Union’s FuelEU Maritime Regulation, implemented in July 2023 as part of the Fit for 55 Legislative Package. As a cornerstone of the EU’s climate strategy, this regulation aims to reduce greenhouse gas (GHG) emissions from maritime transport by mandating the use of low-carbon fuels and technologies to drive decarbonization.
This article explores the key aspects of the FuelEU Maritime Regulation, its relationship with the EU Emissions Trading System (ETS), its implications for shippers and how voluntary initiatives like GEODIS’s Sustainable Marine Fuel (SMF) insetting service complement these measures, providing additional pathways for reducing emissions.
FuelEU Maritime – Understanding the Regulation
The FuelEU Maritime Regulation (Regulation (EU) 2023/1805) is a policy designed to decarbonize the maritime sector and promote the use of low-carbon and renewable energy solutions. It applies to ships above 5,000 gross tonnages calling at EU ports, regardless of their flag.
The key regulatory requirements are:
GHG Intensity Limits
Ships must reduce the GHG intensity of their fuels annually, starting with a 2% reduction by 2025, increasing to 6% by 2030, 13% by 2035, 26% by 2040, and ultimately reaching 80% by 2050. These limits include all lifecycle emissions, covering CO2, methane, and nitrous oxide on a Well-to-Wake (WtW) basis.
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Zero-Emission Requirements at Berth
Starting 2030, passenger and container ships will be required to use onshore power supply (OPS), such as electric charging or hybrid battery systems, or adopt alternative zero-emission technologies like wind or solar-assisted operations while docked at EU ports. This measure mitigates air pollution in densely populated port areas.
Flexible Compliance Mechanism
FuelEU Maritime provides operators with flexible compliance mechanisms such as banking, borrowing, and pooling to meet GHG intensity limits effectively. For Example:
- Banking: Ships surpassing annual GHG intensity reduction targets can bank surplus credits for future use. These credits do not expire and are transferred to the ship if ownership changes.
- Borrowing: Ships with a negative compliance balance can borrow credits from the next reporting period, subject to a 10% surcharge. Borrowing is limited to avoid consecutive years and excessive reliance.
- Pooling: Multiple ships, even across different operators, can form compliance pools, enabling surplus balances from one ship to offset deficits in another. Pools must maintain a positive total balance.
Technology Neutrality
FuelEU Maritime’s technology-neutral approach allows operators to select fuels and technologies that best align with their operational profiles. For instance, options such as blending biofuels like bio-MGO or using renewable fuels of non-biological origin, such as e-methanol and bio-LNG, are practical solutions to achieve compliance.
Reporting and Monitoring
Under the FuelEU Maritime Regulation , ship operators must develop a monitoring plan to track each vessel’s fuel consumption, energy use, and GHG emissions. This plan must be approved before reporting begins, and annual compliance reports verified by accredited bodies are required. Operators must also carry a compliance document onboard, ensuring transparency and accountability in emissions reduction efforts.
Penalties for Non-Compliance
Operators who fail to comply with GHG intensity limits and do not utilize banking, borrowing, or pooling mechanisms face penalties. These penalties are calculated based on the ship’s GHG intensity deficit and are designed to incentivize compliance while discouraging excessive reliance on non-compliance practices. The penalties contribute to the overall regulatory cost burden, highlighting the need for companies to proactively implement effective compliance strategies.
Relationship Between FuelEU Maritime and EU ETS
In January 2024, the EU expanded the Emissions Trading System (ETS) to maritime transport, complementing FuelEU Maritime by adding economic incentives to cut emissions.
Under the ETS, ship operators are required to purchase allowances for:
- 100% of emissions from voyages within the EU.
- 50% of emissions from voyages between EU and non-EU ports.
- Emissions at berth in EU ports.
Initially, the ETS covers CO2 emissions, with methane (CH4) and nitrous oxide (N2O) included from 2026 onwards. The system is being introduced in phases:
- In 2025, operators must surrender allowances for 40% of emissions reported for 2024.
- In 2026, this increases to 70% of emissions reported for 2025.
- By 2027, operators must surrender allowances for 100% of emissions annually.
The ETS incentivizes ship operators to improve energy efficiency, adopt low-carbon technologies, and transition to alternative fuels. By pricing carbon emissions, it complements FuelEU Maritime’s GHG intensity limits, creating a robust framework for both immediate and sustained decarbonization in the maritime sector.
Cost Implications for Goods Owners
FuelEU Maritime introduces costs for ship operators, which will inevitably impact shippers. These costs are driven by:
Alternative Fuel Premiums
Renewable fuels, such as bio-MGO, bio-LNG, and fuels of non-biological origin such as e-methanol are considerably more expensive than conventional marine fuels. As demand for these fuels rises due to regulatory mandates, prices are expected to increase until supply scales to meet demand.
Compliance Costs
Ship operators face investments in retrofitting vessels with technologies such as engine conversions to accommodate alternative fuels like biofuels, including bio-MGO, bio-LNG, or methanol and installing energy-saving devices (ESDs) like waste heat recovery systems or air lubrication systems.
Adopting zero-emission technologies , such as onshore power supply (OPS) systems or wind-assisted propulsion and implementing advanced emissions monitoring systems are critical measures. However, the associated costs will likely to be passed on to goods owners through increased freight rates.
The impact of these measures underscores the need for goods owners to work with logistics partners like GEODIS, who can help manage these complexities and mitigate cost increases.
GEODIS’s SMF Insetting Service: Driving Responsible Growth
GEODIS’s Sustainable Marine Fuel (SMF) insetting service goes beyond regulatory compliance by providing additional, and impactful measures to reduce emissions further. The service supports the production and use of sustainable marine fuels, delivering voluntary emissions reductions immediately while complementing and adding value to FuelEU Maritime and EU ETS initiatives.
How It Works
The SMF insetting service, based on the Book-and-Claim model, enables goods owners to purchase sustainable fuels directly from fuel suppliers. These fuels are added to the maritime fuel pool, generating measurable environmental benefits without being linked to specific vessels or carriers.
A key advantage of the Book-and-Claim model used in SMF insetting is its ability to separate the environmental attributes (such as CO2e reduction) from the physical fuel. For example, goods owners can purchase CO2 reduction credits tied to sustainable marine fuels, even if the physical fuel is not used on their specific shipment. This means that goods owners who purchase SMF insetting are not paying for the physical fuel itself - that cost remains the responsibility of the shipping line. Instead, they invest in environmental benefits, such as reducing CO2e and boosting demand for low-carbon fuels.
Efforts such as EU ETS and FuelEU Maritime will eventually drive the shipping industry to increase fuel efficiency and step by step reduce the need for additional sustainable marine fuel insetting.
Key Benefits
- Global Reach Beyond Regulations: Unlike FuelEU Maritime and EU ETS, which are limited to EU operations, GEODIS’s insetting service supports emissions reductions on a global scale.
- Additional Advantage: The sustainable fuels introduced through insetting are over and above those required by regulations, fostering increased demand for renewable fuel production.
- Transparency and Accountability: Goods owners receive verified claims of emissions reductions in alignment with corporate sustainability goals.
- Feedstock: Sustainable Marine Fuel procured on behalf of GEODIS customers are produced from waste material such as used cooking oil.
GEODIS Emission Reporting
FuelEU Maritime impacts emissions reporting by introducing flexibility mechanisms that delay uniform emissions reductions. The use of banking, borrowing, and pooling means that reported emissions may not immediately reflect actual reductions. Additionally, the EU allows penalties for non-compliance, further complicating early reporting accuracy.
GEODIS relies on organizations such as EcoTransIT to ensure that reported emissions accurately align with genuine reductions. As compliance improves and the adoption of sustainable practices grows, reported emissions are expected to decrease over time. This underscores the importance of robust verification systems to ensure transparency and alignment with regulatory goals.
GEODIS Approach: Shaping a Sustainable Future in Maritime Logistics
For goods owners, working with logistics partners like GEODIS ensures efficient navigation of these regulatory frameworks. Through services like Sustainable Marine Fuel (SMF) insetting, GEODIS provides additional pathways to contribute to emissions reductions beyond compliance.
Final Note:
FuelEU Maritime and the EU ETS represent critical steps toward decarbonizing the maritime industry. While these regulations impose initial costs, they drive innovation and lay the groundwork for a low-carbon industry.
Resources used for this article are:
European Commision - ETS Reducing emissions from the shipping sector
https://climate.ec.europa.eu/eu-action/transport/reducing-emissions-shipping-sector_en
European Commision - Decarbonising maritime transport – FuelEU Maritime
https://transport.ec.europa.eu/transport-modes/maritime/decarbonising-maritime-transport-fueleu-maritime_en
DNV – White paper: FuelEU Maritime, Requirements, compliance strategies, and commercial impacts
https://www.dnv.com/maritime/publications/fueleu-maritime-white-paper-download/
Lloyd's Register - Identify the challenges to future-proof your fleet through the energy transition
https://www.lr.org/en/services/classification-certification/new-construction/identify-challenges-future-proof-fleet-through-energy-transition/
Alexander Höglund
Head of Sustainability, GEODIS Freight Forwarding
