The countdown for FuelEU Maritime is on. It will come into force from 2025. BSM has already reached important milestones to serve its customers with effective and reliable compliance and emission management services.
Published on 12 Nov 2024
With the FuelEU Maritime regulation, the newest and most ambitious environmental policy will come into force on 1 January 2025. Ships calling at ports in the European Union must start the transition to alternative fuels and energy sources, leading to significant changes in maritime operations in the years to come. Vessels that do not comply with the FuelEU Maritime regulation will face substantial penalties.
The FuelEU Maritime regulation of the European Union aims to align the shipping industry with the EU’s climate neutrality goals. To contribute to this goal, the shipping industry must progressively reduce its greenhouse gas (GHG) emissions by 80% by 2050 compared to 2020.
It will not be possible to comply with FuelEU Maritime through efficiency measures and reduced fuel consumption alone. Instead, new fuels and sources of energy must be used as of 2025. Vessels that continue to exclusively use conventional fuels (LSFO, ULSFO, MGO) for their energy needs will not comply with the FuelEU Maritime regulation and a penalty payment will be enforced on the vessel.
In 2025, an average intra EU trading vessel with an annual fuel consumption of 5,000 MT of conventional fuel will be penalised 200,000 to 310,000 euros at the end of the year depending on the fuel grade if no alternative energy options are used. With every year of continued non-compliance, penalties will increase by an additional 10%. Furthermore, when the GHG intensity limits of FuelEU become more stringent in 2030, penalties will dramatically increase. In addition, failure to comply with the shore power requirements for container and passenger vessels will result in huge penalties, making non-compliant port calls financially unviable.
There are various measures to achieve compliance with FuelEU Maritime. These can either directly concern vessel operations or achieve compliance indirectly. Direct measures are
When it comes to alternative fuels, solutions range from the use of recycled cooking oils to green hydrogen. Each type of fuel requires careful evaluation, depending on the fuel and the vessel. For the use of shore power or sails, the trade patterns of the vessel need to be assessed, and costs and benefits must be weighed.
Apart from using low-carbon fuels and compliance technologies, the EU has implemented flexible options to reduce the GHG intensity penalties. These indirect measures are
Each of the indirect measures must be carefully evaluated: Borrowing compliance could prove to be an expensive mistake, potentially resulting in significantly increased penalties in the following year. The banking of compliance could lead to a penalty exposure for another of your vessels if pooling is not used efficiently. Any pooling arrangement, especially when it comes to contractual agreements, is highly complex and, while potentially offering significant cost savings, must be carefully assessed.
Over the past year, BSM has made significant efforts to support clients in complying with FuelEU Maritime, enabling to manage the new regulation and minimise overall compliance costs effectively and dynamically.
“We are ready on the service side, we are ready on the system side, and we are ready on the workforce side”, Anil Jacob confirms. He is Head of Fleet Performance and responsible for BSM’s Emission Management Services. “From the outset, our approach was not just to develop measures to ensure the necessary compliance management. We wanted to go further and create real added value”. FuelEU Maritime is highly complex and multi-dimensional that pitfalls lurk everywhere. A wrong decision you make today, for example regarding the use of alternative fuels or new technologies, can cost you very dearly in the future and affect your competitiveness. “We offer our customers a full and transparent picture of each of their ships and vessel-specific solutions. This ensures the certainty of having all aspects and options fully in view and being able to make substantiated decisions.”
In addition, BSM prepares and sensitises its employees in the fleet teams and its seafarers on board the ships on FuelEU Maritime. “We have held numerous webinars for shore staff and are preparing our seafaring staff for the new FuelEU requirements as part of our Vessel Performance and Decarbonisation Courses, said Jacob. In the end, it's all about everyone pulling together, the fleet teams, the seafarers, IT developers, performance superintendents, data analysts and many more, and of course in close cooperation with owners and their charter customers. “I am convinced that we are ahead of track.”
The FuelEU Maritime regulation requires a revision of contracts to address responsibilities and financial risks. This is not only the case for charter parties. A revision of ship management contracts is necessary to address the new challenges introduced by the FuelEU Maritime regulation.
BIMCO is still working on creating a FuelEU Maritime Clause for the Shipman Agreements. The outline clause in its present form acknowledges that for the purpose of FuelEU Maritime, the DOC holder serves as frontend towards the EU authorities. It will describe the contractual task basket between ship manager and vessel owner as follows: The ship manager will be in charge of handling the fuel and perform monitoring and reporting tasks according to vessel owners’ needs. The vessel owner will be in charge of ensuring compliance through the above means e.g., by sourcing compliant biofuel, pooling the vessel, banking or borrowing. Where owners decide to trade the vessel uncompliant, the penalties are on owners with sufficient security to be granted to the DOC holder.
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