FuelEU

FuelEU maritime is a part of the Fit for 55 packages adopted by the European Parliament in 2021. FuelEU and the bundle of packages aim to reduce GHG emissions to 55% by 2030 compared to 1990 levels and ultimately achieve climate neutrality by 2050. The regulation will be formally adopted by the end of the year 2023. With the final draft of the text already available the shipping community has already started discussing the intricacy of the regulation.
 

The Objective of the Regulation:

The primary aim of the FuelEU Maritime regulation is to promote the adoption of renewable and low-carbon fuels through two key measures:
 

• By setting a cap on the greenhouse gas (GHG) intensity permitted for ships arriving at, departing from, or present in EU/EEA ports, thereby encouraging the use of renewable and low-carbon fuels.
• By mandating the use of On-shore Power Supply (OPS) or zero emissions technology in ports under the control of EU Member States specifically for container ships and passenger ships.

 

The Scope of Application:

The regulation will be applicable to vessels with a gross tonnage (GT) exceeding 5000, regardless of their flag state, when they are involved in the commercial transport of passengers or cargo and call at EU/EEA ports.

In terms of calculating GHG intensity, the FuelEU regulation will include the following:
 

• 100% of the energy is used by ships at EU / EEA ports.
• 50% of the energy used by ships for voyages performed between EU/EEA ports and non-EU/EEA ports, and vis-a-versa.
• 100% of the energy is used by ships for voyages between two EU/EEA ports.

Vessels with a gross tonnage (GT) exceeding 5000 are responsible for 90% of the overall greenhouse gas (GHG) emissions originating from the maritime industry in Europe. The Commission intends to reconsider its stance at a later point to potentially include vessels with a GT below 5000 within the scope of the FuelEU regulation.
 

GHG intensity limit used on-board by the ships:

The FuelEU Maritime regulation has set an energy usage limit for ships on board, with a reference value of 91.16 grams of CO2 equivalent per megajoule (MJ). This reference value is set to undergo periodic reductions until the year 2050.

The regulation requires the use of well-to-wake (WtW) emission factors to compute emissions and greenhouse gas (GHG) intensity associated with the fuel used on board. The GHGs covered by the regulations include Carbon Dioxide (CO2), Nitrous Oxide (N2O), and Methane (CH4).

The overall GHG intensity of the ship operations will be determined by converting N2O and CH4 emissions into CO2 equivalent emissions.

In cases where a ship utilizes multiple types of fuel, the GHG intensity will be calculated using a weighted average of energy consumption.
 

Renewable Fuels of Non-Biological Origin (RFNBO)

To promote the early growth and adoption of sustainable and innovative fuel technologies, such as Ammonia, that can meet future energy needs, the European Commission acknowledges the importance of introducing specific incentives tailored for Renewable Fuels of Non-Biological Origin (RFNBO).

To encourage the use of Renewable Fuels of Non-Biological Origin (RFNBO) by ships, a multiplier of 2 can be applied to reward those ships that incorporate RFNBO in their GHG intensity calculations.

The European Commission will conduct a comprehensive analysis of the RFNBO market and its availability. If, during the reporting period in 2031, the proportion of RFNBO falls below 1%, a sub-target of 2% will be imposed for these fuels in a ship's annual onboard energy consumption, starting from January 1, 2034. The Commission will establish implementing acts to offer guidance on the criteria for assessing RFNBO and to evaluate the requirements for adjusting the sub-target.
 

Zero emission Requirement for energy used at shore:

Starting in 2030, container and passenger ships visiting EU ports will be mandated to connect to a shore power supply to fulfill all their electrical power needs. These two types of ships have been identified as the largest emitters based on data collected by the European Commission since 2018 under the EU RMV regulation.

Meeting this requirement will necessitate a collaborative effort from both port authorities and ship owners. Infrastructure must be developed to accommodate the power demands of these ships.

However, there are scenarios in which ships may be exempted from using On-shore Power Supply (OPS):
 

• If the ship docks for a period of less than two hours.
• When suitable energy resources at the shore are unavailable to meet the ship's power requirements or if there are compatibility issues with the connection points.
• If the ship is utilizing an alternative zero-emissions technology while at the shore.
• In the case of an unscheduled port visit due to an emergency or for the safety of the ship and its crew.

Derogations for Ice Class Ships:

Ships that possess an ice-class notation such as IA, IA Super, IB, IC, or their equivalent could seek an exemption from the additional energy consumption related to navigating in ice conditions. Specifically, ships with the IA or IA Super notation, or their equivalent, may request this exclusion based on their ship's technical attributes.
 

Specific requirements of FuelEU Maritime:

Fuel EU database

A FuelEU database will be established by the Commission to maintain records of various aspects related to regulatory compliance. This database will include information about:

• Verification activities and related actions.
• The compliance status of individual ships.
• The utilization of flexibility mechanisms such as banking, borrowing, and pooling of allowances.
• Actions pertaining to FuelEU penalties.

Access to the FuelEU database will be granted to relevant companies, including the ones responsible for compliance (which can be shipowners or other entities like managers or bareboat charterers who have assumed responsibility from the shipowner), verifiers, National Administrators (NABs), Competent Authorities, and the European Maritime Safety Agency (EMSA).

Compliance balance

It is a measure of the over or under-compliance computed by comparing with the allowed limits of average GHG intensity of the energy used on board by a ship or the RFNBO sub-target.

Banking and borrowing of compliance balance

The compliance surplus, which is determined based on GHG intensity for a specific reporting year, can be carried forward to the compliance balance for the following year for the same ship. Conversely, in the event of a compliance deficit, the company will have the option to borrow an equivalent amount from the upcoming reporting year's anticipated compliance surplus.

However, it's important to note that if a company borrows a compliance surplus, an amount equal to 1.1 times the borrowed balance must be subtracted from the compliance balance of the subsequent reporting year. This provision is designed to ensure that borrowed compliance surpluses are eventually repaid with a slight penalty.

Pooling of compliance

Ships from one or more companies have the option to form a pool to collectively work towards meeting the GHG intensity targets. It's important to note the following rules regarding these pools:
 

• A ship's compliance balance can only be part of one pool, not multiple pools simultaneously.
• The compliance balance of a pool in any given reporting year is considered valid only if it is in a positive compliance state, meaning it meets or exceeds the required standards.
• The Fuel EU database is utilized to keep a record of how the total compliance balance of a pool is allocated to each individual ship within that pool, along with the associated verifier responsible for verifying their compliance.

Penalties for non-compliance

The Verifier is responsible for recording the verified compliance balance of both the GHG intensity and the sub-target for Renewable Fuels of Non-Biological Origin (RFNBO) in the FuelEU database.

In cases where a ship falls into a compliance deficit, the penalties will be calculated as per the formula outlined in the regulation.

Furthermore, if a company fails to submit the penalty for two or more consecutive years, the penalty amount shall be multiplied by a factor of 1 + (n-1)/10, where 'n' represents the number of consecutive years without penalty payment.

In addition to penalties, ships can also face an expulsion order, which could lead to further consequences or actions by the regulatory authorities.
 

Compliance timeline FuelEU Maritime

 

How can Verifavia help?

Verifavia can play a crucial role in assisting shipping companies in achieving compliance with GHG emissions regulations including FuelEU Maritime. Here's how Verifavia can help

• Vast Experience: Verifavia brings extensive experience in the field of emissions verification and compliance, having worked with numerous shipping companies and regulatory bodies. This experience allows them to provide expert guidance tailored to the specific needs of each client.
• Robust Process: Verifavia follows a well-established and rigorous verification process to assess a ship's GHG emissions and compliance. Their process ensures accuracy, reliability, and adherence to regulatory standards.
• Continuous Periodic Verification: Verifavia offers continuous and periodic verification services, allowing shipping companies to regularly monitor and assess their GHG intensity compliance. This proactive approach helps companies stay on track and make necessary adjustments to maintain compliance.
• Penalty Evaluation: Verifavia's services include evaluating the potential penalties associated with non-compliance. This allows shipping operators to understand the financial implications of their emissions and take corrective actions to avoid penalties.

In summary, Verifavia's expertise, robust verification process, and ongoing support enable shipping companies to navigate the complex landscape of GHG intensity regulations, maintain compliance, and make informed decisions to minimize penalties and improve environmental performance.

Contact us at insights@verifavia.com for further information and collaboration.