Authored by Antonia Panayides and Alexander Drury.

While the shipping industry is still coming to terms with the EU Emissions Trading Scheme ("EU ETS”) the next decarbonisation initiative, FuelEU Maritime ("FuelEU”), is rapidly sailing into view. Today is the start of our “FuelEU Friday” series, looking at the Regulation.

Over the coming weeks we will be posting short insights into FuelEU including:

• What is FuelEU? Who has to comply with it?
• How FuelEU works
• How to achieve compliance: Banking, Borrowing, Pooling and Paying

What is FuelEU?

FuelEU is part of the EU’s Fit for 55 Package and aims to support decarbonisation in the shipping industry by setting and gradually reducing, emission targets from journeys to/from EEA ports. 

The scheme targets the greenhouse gas intensity of energy used on a vessel. This is largely determined by the fuel used, with the Regulation rewarding cleaner fuels.

FuelEU enters into force from 1 January 2025 but monitoring plans for vessels already calling at EEA ports must be submitted by 31 August 2024.

Which vessels have to comply with FuelEU?

The Regulation applies to vessels operating to/from EEA ports with a gross tonnage of 5,000 or more, regardless of their flag. All of the fuel consumed on voyages between EEA ports will be covered by the Regulation, but only half of the fuel consumed on a voyage starting or ending outside the EEA will be subject to the Regulation.

In addition, all energy used during a vessel’s stay within an EEA port will be subject to the Regulation.

Who is responsible for complying with the Regulation?

Under the Regulation the compliance burden falls on the ‘company’, defined as:

“…the shipowner or any other organisation or person such as the manager or the bareboat charterer, which has assumed the responsibility for the operation of the ship from the shipowner and 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.” 

Note – An implementing regulation in respect of EU ETS clarified that responsibility thereunder lay with the registered shipowner by default, unless mandated to another entity. There is no equivalent with FuelEU.

While compliance lies with the ‘company’, the Regulation does state that in line with the  ’polluter pays’ principle, the entity responsible for purchasing the fuel or for taking operational decisions that affect the GHG intensity of the energy used by the ship could, through contractual agreements, in the event of compliance deficit, be put under the obligation to reimburse the company in respect of the cost of the FuelEU penalties. 

That’s all for our first FuelEU Friday post. Next week we will be looking at how the scheme works. In the meantime, please do get in touch with any questions.