FuelEU Maritime - Is It Too Late to Act?

Ossi Mettälä is product manager at NAPA Shipping Solutions. Image Credit: NAPA Shipping Solutions

As we approach the new year and the introduction of FuelEU Maritime, it's a familiar scenario for the shipping industry ahead of any new regulation: there are some proactive front-runners who are well prepared, some late to the party but scrambling to build their strategy, and some who are waiting to see what unfolds or are held back by resource constraints.

Wherever you may be in terms of FuelEU Maritime readiness, one thing is clear: FuelEU Maritime is not like its predecessors and has the power to transform the industry.

The regulation is part of the EU's 'Fit for 55' toolkit to help the EU achieve climate neutrality by 2050, with an initial mandate to reduce the EU's greenhouse gas (GHG) emissions by at least 55% by 2030. With a steep target, FuelEU Maritime offers a compelling mix of incentives and penalties to accelerate the uptake of low and zero carbon fuels to minimise GHG intensity.

Penalties are robustly enforced and, at €2,400 per tonne VLSFO energy equivalent, they are high enough to encourage investment in low-carbon fuels and alternative-fuel "ready" vessels.

Beyond immediate penalties, non-compliance will also affect vessel value, with some estimates putting the buyer's exposure in the range of $150,000 to $200,000.

Has the industry heeded this warning? According to DNV, there could be up to seven times more deficit than surplus of compliance units across the industry when the data for 2025 is finalised, which shows that imminent action is inevitable, be it pooling, borrowing, or paying a penalty.

Simulations based on NAPA performance models and pooling cost estimates released by the MMMCZCS reveal a snapshot of the scale of the potential costs involved – although exact prices will be set by the market.

Consider a typical capesize bulk carrier operating between Brazil and Rotterdam that consumes approximately 16,700 tons of fuel annually, considering both VLSFO 380 CST and LSMGO. With a GHG intensity of 91.4gCO2/MJ, the vessel would face a compliance deficit of 703.70 tonCO2. This represents nearly €450,750 in penalties for 2025, adding 5.1% to bunkering costs.

Instead, a Ro-Ro vessel equipped with rotor sails and operated between EU ports in the Northern Atlantic can generate a compliance surplus of 1,750 tons annually. One such vessel can, therefore, offer significant "excess" through pooling and offset the emissions of nearly 2.5 bulkers from the first example.

Considering the €420 per ton estimate for the price of pooling, the surplus could generate just under €207,000 additional revenue through pooling, which represents a reduction of nearly 3% in bunkering costs. 

Similarly, analysis by the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping (MMMCZCS) reveals that in 2025 itself, paying the premium for blending biodiesel will generally be cheaper than paying the penalty on a per tonne of abatement basis. Further, vessels that are compliant or in excess will open the door to new business opportunities for their owners through pooling. 

This could, ultimately, increase asset value and provide access to easier financing.

At this juncture, the urgency and imperative to act is clear. The question, therefore, is what needs to be done to avoid penalties and seize emerging opportunities?

First Steps to Compliance

FuelEU Maritime benefits significantly from hindsight and the lessons learnt from the European Union's Emissions Trading System (EU ETS) and the International Maritime Organization's Carbon Intensity Indicator. Both landmark regulations have highlighted the underpinning role of data in informing compliance strategies.

Fleet operation data is a critical asset for making informed decisions. It not only monitors compliance deficits and surpluses but also allows owners to weigh the cost-benefit analysis of different compliance strategies. This data informs decision making around how much drop-in biofuel is needed to reach compliance and be able to compare that to the cost of penalties.

Owners and operators can see what vessels are behind the curve and which ones are best moved to non-EU routes. And when the time comes for fleet renewals, they will be able to assess the business case for investing in alternative-fuel-ready ships, knowing what impact this will have on the compliance of their entire fleet as the GHG intensity requirements are gradually tightened. 

Without answers to these questions and clarity on each scenario, companies risk sailing blind.

Being able to quantify the extent of a fleet's current and future compliance (or non-compliance) is business-critical. It gives owners and operators the strategic advantage of 'pooling' their vessels with excess compliance with others in their fleet that fall short– or look at opportunities to pool their ships with other companies for a defined period of time. Several new companies are already cropping up to facilitate this pooling across companies. 

For most owners, compliance is likely to be driven by either adopting drop-in biofuel and/or wind-assisted propulsion, as well as pooling, borrowing or simply paying penalties for others. All these options have their own challenges, from competing for and securing the availability of alternative fuels at ports to navigating the cost of pooling.

Being able to assess these opportunities against the cost of penalties depends on being able to access an accurate, data-driven viewpoint of your fleet.

The Growing Role of Digital Platforms

With a whole web of factors to consider in your FuelEU Maritime strategy, digital platforms, like NAPA's FuelEU Maritime module, can help simplify the complexity and streamline this wealth of information. 

Equipped with data from noon reports on the quantity and type of fuel consumed on board, the module enables owners to visualise compliance shortfalls or surpluses for every ship, even on a voyage-per-voyage basis.

Taking this one step further, the module allows shipping companies to test and assess different compliance strategies to see how each option would impact their fleet's compliance, including the cost of potential penalties or surplus to be gained.

These capabilities were first tested across 1,500 vessels through ClassNK's ZETA platform, and were shown to help owners and operators understand the carbon and dollar impact of the new regulation on their operations.
 
So, is it too late to prepare for FuelEU Maritime? Not at all.

With the right data toolkit, owners and operators can gain a deeper understanding of their fleet and compliance options to take action today. Digital technologies are the guiding compass leading the industry towards compliant, sustainable and profitable shipping.