26 July 2023 (Lloyd's List) - THE EU Council adopted the FuelEU Maritime regulations that will set strict targets for shipping’s decarbonisation as it aims to not only reduce overall emissions but also increase the use of renewable hydrogen-derived bunker fuels. 

The new rules mandate that shipping reduces greenhouse gas intensity for energy used on board a ship by 2% from 2025, 6% from 2030, 14.5% from 2035, 31% from 2040, 62% from 2045 and 80% from 2050. The reduction targets are all set against 2020 levels of 91,16 grams of CO2 equivalent per megajoule.

The EU is also trying to send necessary demand signals for renewable fuels of non-biological origin, also called RFNBOs, as it set a 2% sub-target for these products in the maritime bunker fuels from 2034 if the share of these fuels in the bunker mix is less than 1% by 2031.

The bloc also decided to reward first movers that will use RFNBOs before 2034, as it introduces a multiplier of two to reward companies who use these fuels from 2025 until the end of 2033, allowing the energy from RFNBO to count twice.

The new targets will apply to ships above 5,000 gt and to all energy used on board in or between EU ports, as well as to 50% of energy used on voyages where the departure or arrival port is outside of the bloc or in EU outermost regions.

The EU also adopted new regulations that oblige member states to provide minimum shore-side electricity for seagoing containerships and seagoing passenger ships in major EU ports that are included in the Trans European Transport Network (TEN-T).

Shipping companies will submit a monitoring plan to independent verifiers by 31 August 2024 for each of their ships for reporting the amount, type and emission factor of energy used on board by ships.

FuelEU rules also introduce penalties for non-compliance that will have a ‘dissuasive effect’. Penalties will be based on the amount and cost of renewable and low-carbon fuels that the ships should have used to meet FuelEU rules. Revenues from these penalties will be used to promote the distribution and use of alternative fuels in the maritime transport sector.

Companies will be able to use a voluntary pooling mechanism to comply with FuelEU’s carbon intensity targets and RFNBO sub-targets, meaning they will be able to pool their compliance balance with one or more other ships that may be controlled by two or more companies.

Initial interpretations of this pooling mechanism suggest it will be used by companies that own or charter a vessel in a given timeframe rather than paving the way for measures such as book and claim.

The book and claim concept helps vessels that want to buy alternative fuels such as green methanol or green ammonia but may not be able to access fuel when they bunker. It allows those companies to pay for alternative fuels and let other vessels that call at ports with available supply refuel with alternative fuels in their place.

There are several pieces of secondary legislation to be finalised by the end of 2023 to clarify how FuelEU rules will be implemented, such as the accreditation of verifiers and establishing the FuelEU database. Classification societies that are current accredited verifiers of the EU’s monitoring, reporting and verification (MRV) are likely to carry out the same duties under FuelEU Maritime.

The EU’s targets to boost use of renewable fuels are more tangible compared with the International Maritime Organization’s revised strategy that includes uptake of 5% by 2030 for zero or near-zero GHG emission technologies, fuels and/or energy sources, despite an earlier date.

The IMO will need to clarify what exactly count as near-zero GHG emission technologies, fuels and energy sources. Experts following the IMO’s MEPC 80 summary suggested the inclusion of the word energy implies the use of wind-propulsion technologies, among other measures.

The FuelEU Maritime and complementing regulations, such as the inclusion of shipping in the Emissions Trading System, could help Europe become the biggest market for renewable hydrogen-derived fuels such as green methanol and green ammonia.

The bloc has been ramping up efforts to tackle shipping emissions with these new regulations, while seeking to kickstart alternative fuel production at the same time with targets to reach 10m tonnes of local clean hydrogen production by 2030 as well as 10m tonnes of imports by the same date.