FuelEU Maritime Initiative – Next phase of the Fit for 55 Package?

In addition to the suite of IMO (EEXI and CII regimes) and European legislation (EU ETS) that Nordisk Members are already adapting to, the EU is now in the process of implementing another regulation as part of their “Fit for 55 Package”, aimed at reducing the GHG intensity in favour of sustainable maritime fuels.

The FuelEU Maritime Initiative was agreed as a provisional political agreement between the Council and the European Parliament on the 23 March 2023, and now only subject to formal approval by the two co-legislators.

Specific measures in the FuelEU Maritime Initiative
The initiative seeks to establish a comprehensive regulatory framework to support the transition to cleaner fuels. By creating a level playing field and providing clear guidelines, the FuelEU Maritime initiative aims to encourage investment in sustainable technologies and incentivize shipowners to make the necessary changes to their fleets. This involves particularly (i) setting binding targets for the increase of low-carbon fuels in the maritime sector and (ii) implementing certain obligations to connect to onshore power supply or zero-emission technology in EU ports.

1. Maximum limits on the yearly GHG intensity of the energy used by a ship
The requirement to reduce the yearly greenhouse gas intensity will apply to commercial ships of 5,000 and above and covers all energy used on board when the ship is at an EU port and on voyages between EU ports, and 50% of the energy used on voyages departing from or arriving to an EU port, regardless of flag. All greenhouse gas emissions that a given fuel generates have to be taken into account (full lifecycle – well to wake), not just those used by the ship.

The initiative introduces increasingly stringent limits on carbon intensity of the energy used by ships from 2025 to stimulate and reflect the anticipated increase in production of renewable and low-carbon fuels and the expected developments in technology. The annual targets shall be determined against a reference value which corresponds to the fleet average greenhouse gas intensity of the energy used on-board by ships in 2020, and the initiative anticipates a reduction of 2% as of 2025, gradually increasing to 80% as of 2050.

2. Zero-emission requirement while at berth
In addition, from 1 January 2030, a containership or passenger ship calling at an EU port shall connect to on-shore power supply and use it for its electrical power demand at berth, unless, among other exceptions, the ship already use zero-emission technologies for their on board power requirements.

Responsibility for compliance and consequences of non-compliance
Similar to the EU ETS, the responsibility for compliance lies with the “shipping company”, defined as the shipowner or any other organisation or person, such as the manager or the bareboat charterer, that has assumed the responsibility for the operation of the ship from the shipowner and that, on assuming such responsibility, has agreed to take over all the duties and responsibilities imposed by the International Management Code for the Safe Operation of Ships and for Pollution Prevention.

To ensure compliance with the regulations and track progress, the initiative proposes monitoring, reporting, and enforcement mechanisms. This therefore requires ships to report their fuel consumption, emissions, and other relevant data. It also establishes penalties for non-compliance and outlines the enforcement procedures to ensure the effectiveness of the initiative.

In our view, the objective of the initiative is good but there are some challenges connected to the proposal, for instance the current lack of low-GHG intensive fuels in the global market,as well as the practicalities of assessing the “well to wake” GHG emissions and data collection involved. Hopefully, the initiative will contribute to accelerate the switch to alternative fuels and consequently, reduce the overall GHG emissions from the maritime sector.

Regardless of what we may perceive the pitfalls to be, it is set to become legislation, so Members are encouraged to start preparing on how to comply with the anticipated requirements and be aware of the FuelEU Maritime Initiative for voyages touching the EU (and EEA) area going forward when entering into new charterparties that extend into 2025 and beyond. Nordisk will continue to monitor the developments and remains available to assist Members with any questions they may have.