9 July (LLoyd's List) - THE container shipping sector is set to bear the brunt of new European environmental regulations that come into force from the beginning of next year.

Research from analysts at OceanScore indicates that shipping will incur penalties of €1.3bn ($1.4bn) in 2025 as the first effects of the European Union’s FuelEU package come into play.

Vessels in the passenger/cruise, container, ro-pax, bulker and tanker segments will have significant cost exposure from the regulation due to be implemented from January 1, 2025, despite a relatively modest initial target of a 2% cut in greenhouse gas intensity.

Vessels will be penalised to the tune of €2,400 per tonne of very low sulphur fuel oil-equivalent for failing to meet the initial 2% reduction target relative to a 2020 baseline for average well-to-wake GHG intensity from fleet energy consumption. The GHG intensity requirement applies to 100% of energy used on voyages and port calls within the EU/European Economic Area and 50% of voyages into and out of the bloc.

But as with the European Union Emissions Trading System, the container segment will bear the brunt of FuelEU costs, accounting for 29% of gross penalties, followed by ro-pax on 14%, and tankers and bulkers each on 13%, according to OceanScore’s analysis.

“It is critical for shipping companies to determine a baseline for expected FuelEU costs to secure proper planning and budgeting processes to compare different mitigation options, as well as to decide what to do with outstanding compliance balances,” said OceanScore managing director Albrecht Grell.

“This will require, to a higher degree than the EU ETS, a corporate strategy to determine how to reduce the compliance balance/deficit, how to commercialise a surplus and deal with deficits that remain.”

OceanScore estimates that liabilities per vessel will differ widely across the various segments due to increasingly diversified fuel choices, including greater uptake of biofuels and LNG.

Passenger vessels will be penalised the most with an average of €520,000 per vessel annually, followed by ro-pax at €480,000 and ro-ro at €314,000, with an average penalty for containerships of only €214,000.

Grell added that there are also massive discrepancies between vessels within these segments, with a number of ships in the passenger and ro-pax segments exposed to penalties of between €1.8m and €2.5m, and payment obligations for some container ships approaching €1m, driven by higher energy consumption due to vessel size and trading profile.

While penalties will arise from so-called ‘compliance deficits’ for vessels using conventional fuels, surpluses totalling an estimated €669m will be generated mainly by vessels fuelled by LNG and liquefied petroleum gas, with significantly lower carbon intensity.

“LNG carriers will account for 78% of the total market surplus and gas carriers 8%, while a further 8% will be generated by containerships that have seen a modest uptake in alternative fuels in recent years,” OceanScore said.