FuelEU Maritime Regulation FAQ’s

Further to the introductory article in our June 2023 circular , we set out hereunder some more detailed information regarding the specifics of the FuelEU Maritime regulation, in what we hope is an easy to digest question and answer format.

Q1. Who is responsible under FuelEU Maritime?

The responsible entity is the “company”. Whilst the regulation uses an almost identical definition to that of the shipping company in the EU ETS Directive, the European Commission has confirmed that for FuelEU Maritime, the responsible entity is always the ISM Doc Holder. This can result in a different entity being responsible for monitoring and reporting under MRV/EU ETS to that under FuelEU Maritime.

Q2. What do I need to do?

The first action required is to submit a FuelEU Monitoring Plan to a registered verifier. The deadline for submission is 31 August 2024.

From 1 January 2025, the Regulation applies in full. Each ship has to report its annual GHG intensity and get this verified. The compliance cycle is as follows:

31 January
Submit FuelEU report to verifier for previous reporting period

31 March
Verified FuelEU report and compliance balance recorded in FuelEU database

30 April
The company records for each vessel whether it will borrow or pool for each vessel (see Q.4 further below).

1 June
Where there is a  compliance deficit, the Administering Authority will inform the company it is obliged to pay the FuelEU penalty

30 June
Verifier issues FuelEU Document of Compliance if a ship does not have a compliance deficit (and has no non-compliance port calls) or where there was a compliance deficit, but the company has paid the FuelEU penalty.

Q3. What are the methods of compliance?

The use of renewable and low carbon fuels which have a lower well-to-wake emission factor, investing

n fuel efficient technology so that less power is used onboard and by connecting to shore power when in port will all reduce the GHG intensity of a ship. The scheme also rewards shipowners who invest in wind assisted propulsion and use renewable fuels of non-biological origin.

The regulation has inbuilt mechanisms to assist compliance – banking/borrowing and pooling of compliance balances. Finally, where a ship has a compliance deficit, the company can pay its way out, by paying the FuelEU Penalty. However, the level of penalty is intended to dissuade such behaviour. It will increase over time as the reduction targets get more stringent and will be increased by a multiplier if a company is subject to the Penalty for two or more consecutive years.

Q4. What is borrowing and banking?

A company can roll over and bank (credit) a compliance surplus from one reporting period (i.e. the ship has over performed) to the following reporting period.

And vice versa, if a ship has a compliance deficit during a reporting period (a ship has under-performed), the company can borrow an advance compliance surplus from the following reporting period for the ship. However, this comes at a cost. A factor is applied so that the amount subtracted from the following reporting period is higher than the amount the ship receives in the current reporting period. There is also a limit on the amount which can be borrowed and frequency.

Q5. How does pooling work?

Ships can pool their compliance balances with one or more other ships to achieve compliance. This enables more efficient ships using low-carbon fuels to soak up the excess from other ships with a higher GHG intensity.

Pooling does not have to be amongst ships under the same ownership or control. However there are certain conditions:

(1) The total pooled compliance must be positive, i.e. the pool as a whole has to meet the GHG intensity limits. A ship which had a compliance deficit to begin with cannot have a greater deficit after pooling and a ship which had a compliance surplus to begin with cannot have a deficit after pooling.

(2) To be eligible to pool compliance, a ship must have a valid FuelEU document of compliance.

(3) Each ship can only participate in one pool per reporting period.

Q6. What are the consequences of non-compliance?

Port state inspections will include checking that a ship holds a valid FuelEU Maritime document of compliance.

If a ship fails to obtain its FuelEU Document of Compliance for two or more consecutive periods, it can be subject to expulsion orders and refused entry to the ports of Member States.

Whilst the company is the responsible entity, enforcement measures apply against the ship.

Q7. Do I need a FuelEU Maritime Clause?

BIMCO is working on a FuelEU Maritime clause with the aim of publishing this towards the end of 2024. In addition we expect to see bespoke clauses.

In a time charter, specific wording will be required to enable an owner to allocate the cost and responsibility of facilitating compliance to the charterer. For example, this may include an obligation requiring the charterer to (a) provide sufficient bunkers from renewable or low carbon fuels to enable compliance, (b) provide compliant bunker delivery notes which contain (where applicable) the additional information required by Annex 1 of the Regulation and/or (c) reimburse the cost of the FuelEU Penalty.

In a voyage charter, the owner has control over the purchase of bunkers. The additional costs of compliance could be built into the freight or included as a surcharge.

Where the ISM DOC Holder is the technical manager, a clause in the management agreement will likely be required to apportion responsibility and cost.

As always, we are available to assist and advise our Members on FuelEU Maritime.