From January 1st, 2025, the European Union is raising the bar on greenhouse gas emissions. Forming part of a broader European strategy to reduce dependency on fossil fuels, the upcoming FuelEU regulations primarily target fuel choice. But the compliance mechanism also demands further integration of data and digital technology into maritime trade. Shipping companies (more specifically, entities with ISM code responsibility) must begin reporting EU voyage data and greenhouse gas emissions, including CO₂, CH₄, and N₂O, from all vessels over 5,000GT. They will also be required to provide detailed records of fuel consumption, energy efficiency measures, operational data such as distance traveled and cargo carried, and the use of any alternative fuels or energy sources. All this data must undergo independent third-party verification, and digitalized data management will be key to complying efficiently and cost effectively.

So, what should you already be on top of in these final few months to launch? In this blog, we’ll review the basics of FuelEU Maritime and dive into penalty calculations in a bit more detail.

What is the compliance timeline?

First, let’s zoom out and look at the requirements. FuelEU Maritime is an EU policy initiative designed to promote the use of renewable and low-carbon fuels in maritime transport. It mandates a gradual reduction in the GHG intensity of fuels used on board commercial vessels, aiming to phase out heavy fuel oil and other high-emission fuels. This directive is part of the EU’s ‘Fit for 55’ policy initiative, which seeks to reduce GHG emissions by 55% by 2030.

The regulation focuses on the Well-to-Wake (WTW) emissions factor, which assesses the total lifecycle emissions of maritime fuels, from extraction to combustion. This comprehensive approach incentivizes the adoption of cleaner technologies and fuels across the supply chain, ensuring a holistic reduction in GHG emissions and encouraging fuel producers and suppliers to improve industry standards over time.

Generally, FuelEU will take a phased approach, with increasingly stringent compliance thresholds coming in to play over the next decade. Here are the key dates to be aware of:

FuelEU Maritime Compliance Timeline

Link to source

August 31, 2024: Monitoring Plan Deadline: Companies are required to submit a monitoring plan for each ship in their fleet (article 8)

January 1, 2025: Companies are required to record data for each of their ships’ arrivals and departures at EU ports. (article 15) In particular:

  • Ports of departure and arrival, with dates and times, including duration of stay at berth.
  • Connection to onshore power supply (OPS) or the application of relevant exceptions, detailing fuel consumption at berth and at sea.
  • The amount of electricity received through OPS.
  • For each fuel type used, report well-to-tank and tank-to-wake emission factors for combusted and slipped fuels, encompassing all relevant greenhouse gases.
  • The amount of each type of substitute source of energy consumed both at berth and at sea.
  • If applicable, the ship’s ice class and information about voyages undertaken in ice conditions.
  • Reduction target set at 2%.

January 31, 2026: First annual report deadline. A ship-specific ‘FuelEU report’ must be provided to the verifier (Article 15 (3))

January 1, 2030: The next reduction target of 6% comes into force, marking a hardening of reduction requirements.

January 1, 2035: The reduction target increased to 14.5% and begins accelerating towards an 80% reduction by 2050.

How will penalties be calculated?

The FuelEU regulation specifically targets the type of fuel used onboard.  There are several key distinctions which set the FuelEU regulations apart from other decarbonization measures. Firstly, the unit measurement — equivalent CO2 emissions produced per unit of energy (gCO2e/MJ). This means that the result is influenced by the proportional contribution of each fuel to the total energy consumption over the course of the year. In short, if a larger proportion of energy is derived from lower emission fuels, then the Fuel EU result will be positively impacted.

The result of an annual FuelEU assessment will be a monetary penalty or credit in Euros, derived from the difference between the gCO2e/MJ achieved and the nominal target. To calculate the compliance penalty, the gCO2e/MJ compliance difference is multiplied by the total energy used for the year. Interestingly, this means that the amount of fuel used will affect the magnitude of the penalty or credit. In other words, a non-compliant vessel can limit its exposure to a FuelEU penalty by conserving fuel on EU voyages.

EU directive 2023/1805 lists the reference values for each fuel and sets out the parameters for the alignment calculation. This directive makes one thing clear: Providing WTW emission factors for fuel type, such as biofuel and Renewable Fuels of Non-Biological Origin (RFNBO), is going to be a complex procedure. Other than standard fossil origin fuels, most of these alternative fuels are yet to have established default values and many of the parameters are still listed as ‘To Be Measured’ (TBM).

In July 2023, the IMO adopted a set of Lifecycle Assessment (LCA) guidelines which provide a standardized method for calculating WTW emission factors. These are expected to be incorporated into the next revision of the Carbon Intensity Indicator (CII) program, slated for 2026. Initial comparisons show that these assessment guidelines are effectively the same as the WTW approach suggested for FuelEU, both using equivalent CO2 emissions as the unit to represent overall Global Warming Potential (GWP) for all the various factors involved in the fuel extraction, production, and usage. The goal of the IMO is to incorporate this WTW emission factor into a Fuel Lifecycle Label (FLL), which will provide the information required to accurately report these associated emissions for each type of fuel.

What’s next?

Those shipping companies that need to comply are likely to have submitted monitoring plans to their relevant maritime authority already. However, these plans are just the beginning. Focus needs to be placed on embedding FuelEU penalty calculations into the contract lifecycle and finding ways to share that information among charter parties and account for it from pre-fixture through to completion. Freight management solutions like the IMOS Platform have a fantastic role to play here, where FuelEU penalty calculations become an automated component of the contract workflow, in common with the way that the EU ETS and other sustainability-linked cost centers are handled. Fuel EU is a complicated regulation which introduces a high degree of uncertainty for the maritime sector. However, there are practical ways to prepare that will pay off significantly over time.

At Veson, we are committed to closely monitoring regulatory changes and developing class-leading solutions that complement the evolving needs of our client community. Make sure to subscribe to our blog series, The Logbook, and follow us on LinkedIn to receive more content from our FuelEU series. If you’d like to get in touch with us and learn more, you can visit our sustainability solutions page here, or request a demo from our team here.

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