From 1st January 2025, shipowners and operators need to start collecting data on energy usage onboard each ship in line with FuelEU Maritime regulations.
FuelEU shouldn’t be overlooked as another Brussels regulation; it marks a major market intervention and provides a whole new industrial framework for vessels operating in European waters.
Ships of at least 5,000 gross tonnes must reduce the greenhouse gas intensity of their fuels by 80% against a 2020 benchmark to 2050, or face penalties. This change will be stepped with initial targets small, increasing as we approach 2050, as does the level of intervention needed to comply.
Data collection should be aligned with processes and procedures in the FuelEU Monitoring Plan. Data should be collected over a calendar year on a per voyage basis, compiling and submitting the total year’s data to Lloyd’s Register by 31st January 2026 using Emissions Verifier.
The annual data will be verified and used to calculate different annual aggregates, such as the yearly GHG intensity of the ship and the compliance balance, the latter of which is required for any applicable penalty calculations. Penalties are calculated and collected by the relevant Administering Authority.
Where a vessel is sold part way through a data collection year, the data collected remains with the vessel. The shipowner/operator responsible for compliance with FuelEU on 31 January each year is responsible for submitting all data to their verifier and pay any penalties due.
Fuel hierarchy
The EU takes a view on each of the different fuels available to shipping companies, resulting in a hierarchy, according to Lloyd’s Register.
At the top, carrying the greatest benefits, are RFNBOs (Renewable Fuels of a Non-Biological Origin), produced by combining green hydrogen with other elements such as carbon or nitrogen extracted from the atmosphere.
At the bottom, fossil fuels carry the greatest penalties. Somewhere in between are biofuels, produced from biological sources.
The Renewable Energy Directive set targets for the uptake of RFNBOs in transport and industry. By 2030, they are expected to account for at least 1% of total energy supplied to the transport sector, and at least 42% of all hydrogen used in industry, increasing to 60% in 2035.
Two criteria for renewable hydrogen
There are two types of criteria to ensure that hydrogen is renewable; additionality ensures that increased hydrogen production goes hand-in-hand with new renewable electricity generation capacity. Hydrogen producers must therefore conclude power purchase agreements with new and unsupported renewable electricity generation capacity.
The second concerns temporal and geographic correlation; these criteria ensure that hydrogen is produced when and where renewable electricity is available to avoid the demand for renewable electricity for hydrogen production incentivising more fossil electricity generation.
To support early scale-up, renewable hydrogen producers can sign long-term renewable power purchase agreements with existing renewable installations until 1st January 2028. This delegated act is subject to a review in July 2028.
For certification of renewable hydrogen, producers will be able to rely on a well-established system of certification by third parties, so-called voluntary schemes.
These are international companies with experience in certifying biofuels, biomass and other products worldwide. EU countries are required to accept evidence from schemes that have been recognised by the Commission.
The Commission will remain in close contact with stakeholders and certification schemes to support the practical implementation of the framework and will also monitor its implementation. To this end, it is planned to launch a dedicated study in early 2025.
CO2 as revenue driver
FuelEU incentivises those who are over-compliant by creating a new market within which to sell surplus compliance. While every intervention incurs a cost, it can also generate a return.
Returns can be significant. If a tonne of CO2 equivalent emissions could be worth at least €500 on the open market, and you can save, say, 7,500 tonnes of CO2 equivalent emissions a year, you see how this can quickly turn into a significant driver of revenue.
“The economics invert away from fossil fuels towards lower carbon,” Lloyd’s Register adds. “In this respect, FuelEU cannot be considered just as an imposition, but a major market intervention within which shipping companies with vessels operating in European waters must operate to build a profitable and sustainable future.”
For more information visit lr.org
