Sarah McCann, FD&D Claims Senior Solicitor - Mediterranean/Nordics & Northern Europe, NorthStandard sets out how the FuelEU Maritime regulations will apply and what needs to be done to meet them, together with contractual considerations.
FuelEU Maritime – part of the EU’s Fit for 55 package – will apply from 1 January 2025 to all commercial vessels over 5,000GT trading in the EU that are used to transport cargo or passengers. By the end of August 2024, shipping companies were to submit ship-specific monitoring plans.
The FuelEU Maritime regulations focus on greenhouse gas (GHG) emission intensity of energy used onboard a vessel trading in the EU, or EEA, as measured on a ‘well-to-wake’ basis. It therefore includes emissions relating to extraction, production, and transport of the fuel, as well as emissions from the ship itself.
Under FuelEU Maritime, the yearly average GHG intensity of the energy used on board a vessel shall not exceed a specified limit. This limit is calculated by reducing the 2020 reference value of 91.16 grams of CO2 equivalent per megajoule by a set percentage: from 1 January 2025 this will be 2%, rising to a reduction of 6% in 2030, 14.5% in 2025 and increasing to 80% by 2050.
The FuelEU Maritime regulations apply to 100% of the energy used by a vessel during its stay within an EU / EEA port, and that used on voyages from one EU / EEA port of call1 to another. In addition, it applies to 50% of the energy used on voyages from / to a port of call in an outermost region of a Member State and those from an EU / EEA port of call to a non-EU / EEA port of call (or vice versa).
The responsible entity (or “company”) for FuelEU Maritime will always be the ISM Company (i.e., the Document of Compliance holder). This may, therefore, be the registered owner, a bareboat charterer, or a third-party ship manager, so long as they are the DOC holder.
From 1 January 2025 onwards, based on the monitoring plan, the company will need to record annually (from 1 January to 31 December) the required fuel information and its well-to-wake emission factor2. Individual ship FuelEU reports will need to be submitted to the verifier by 31 January of each year following the reporting period.
By 31 March 2026 (and each subsequent year), the verifier will have to report to the company the information that needs to be recorded in the FuelEU compliance database. Then by the end of April of each year following the reporting period, the company will need to record any advance compliance surplus, while the verifier must record any pool use in the FuelEU compliance database.
By 30 June of the year following the reporting period, the verifier is to issue a FuelEU certificate of compliance (provided that any penalties have also been paid by this date) that is to be carried by ships entering any EU / EEA port.
FuelEU Maritime also requires passenger and container ships to connect to onshore power supplies (OPS) when calling at major TEN-T (Trans-European Transport Network) EU ports from 2030 (where the port stay is longer than 2 hours), and all EU ports with OPS from 2035.
The use of RFNBOs (Renewable Fuels of Non-Biological Origin) between 1 January 2025 to 31 December 2033 will also be incentivised, with a reward factor of 2x in the calculation of the GHG intensity of energy used on board.
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Contractual Implications
Financial penalties will apply to any company that does not meet its compliance obligations in respect of GHG energy intensity, and there will also be financial penalties for any contraventions in respect of the use of OPS whilst in port. Failing to comply for two or more consecutive years will see the penalty factor multiplied, while failure to present a FuelEU Maritime certificate of compliance for two or more consecutive reporting periods could result in a ship being banned from EU ports.
All of these changes mean shipowners, charterers and ship managers should consider carefully how FuelEU Maritime is dealt with contractually in their charter parties, ship management agreements and bunker supply contracts.
Provision should be included in a charter party or ship management agreement for accurate information, compliant with the FuelEU Maritime regulations, to be provided by the party responsible for purchasing fuel for the vessel. This will include, for example, proof of sustainability documentation and the requisite information that needs to be included in bunker delivery notes.
Clear provisions will also be needed within a charter party or ship management agreement as to which party will be contractually responsible for the cost of FuelEU penalties and / or expulsion or detention orders. Consideration also needs to be given 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. These issues will be particularly important where a time charter is for part of a year, or if the charter party spans more than one reporting period. In a voyage charter, the cost of compliance could be allocated through an increased freight rate or by way of a surcharge.
