Scope and Applicability of the Regulation

Regulation (EU) 2023/1805 on the use of renewable and low-carbon fuels in maritime transport, also known as the FuelEU Maritime regulation, is part of the Fit for 55 package aimed at reducing greenhouse gas emissions in the European Union by at least 55% by 2030 compared to 1990 levels.

FuelEU Maritime entered into force on 1 January 2025 and applies to all ships above 5,000 gross tonnage (GT) transporting passengers or cargo, regardless of their flag. The geographical scope largely mirrors that of the EU Emissions Trading System (EU ETS), covering:

● 100% of energy used in EU ports .

● 100% of energy used on intra-EU voyages.

● 50% of energy used on voyages to or from EU outermost regions.

● 50% of energy used on extra-EU voyages.

The regulation addresses all greenhouse gas (GHG) emissions – CO₂ (carbon dioxide), CH₄ (methane), and N₂O (nitrous oxide) – across the full life cycle from Well to Wake (WtW).

There are several exemptions to ensure connectivity that are valid until the end of 2029:

● Domestic voyages by passenger vessels (excluding cruise ships) to islands with fewer than 200,000 inhabitants.

● Inter-island voyages and port stays in EU outermost regions.

● Transnational passenger services under public service obligations (e.g., Cyprus–Greece).

● Public service routes between the mainland and islands, including Ceuta and Melilla in Spain.

Additionally, to prevent carbon leakage, calls at container transhipment ports located less than 300 nautical miles from an EU port (such as Port Said and Tanger Med) will not be counted.

Ice-class vessels and ships operating in icy waters receive special treatment due to higher energy consumption.

GHG Intensity Targets and Compliance Mechanisms

FuelEU Maritime introduces a progressive limit on the annual average greenhouse gas (GHG) intensity of energy used on board ships, measured in grams of CO₂ equivalent per megajoule (gCO₂e/MJ). Ships must calculate their GHG intensity annually and compare it to a reference value that becomes stricter every five years. The difference between a vessel’s GHG intensity and the reference value is referred to as the compliance balance.

● Ships using alternative fuels and technologies may fall below the limit, resulting in a positive compliance balance.

● Ships using conventional fuels will exceed the limit and generate a compliance deficit, which will incur a FuelEU penalty.

The penalty is calculated by converting the excess CO₂ equivalent into tonnes of VLSFO equivalent and multiplying by 2,400. Repeated non-compliance over two or more consecutive periods increases the penalty (+10%, +20%, etc.).

To manage compliance, companies can use flexibility mechanisms:

● Banking: Surplus compliance can be saved and used in the following period.

● Borrowing: Up to 2% of the next period’s GHG target (multiplied by energy use) can be borrowed, but not for two consecutive periods.

● Pooling: Compliance balances can be pooled between ships, as long as a ship is included in only one pool. Pooling must be recorded in the FuelEU database.

Use of Renewable Fuels of Non-Biological Origin

The regulation incentivises the use of Renewable Fuels of Non-Biological Origin (RFNBOs). From 2025 to 2033, these will count double in the GHG intensity calculation. If by 2031, RFNBO used on board is below 1% (in energy terms), a 2% minimum quota will apply from 1 January 2034, subject to penalties for non-compliance.

On-Shore Power supply

From 2030, containerships and passenger ships are required to connect to on-shore power supply (OPS) at TEN-T ports for stays under two hours, with penalties for failing to comply. Certain zero-emission technologies and exemptions apply.

Monitoring, Reporting and Verification Timeline

The regulation introduces a clear compliance calendar starting in 2025:

● Reporting Period: The calendar year.

● Verification Period: The following calendar year.

By 31 January of the verification year, companies must submit a ship-specific report to a verifier, including details on voyages and energy consumption.

By 31 March, the verifier informs the company of each vessel’s GHG intensity, compliance balance, non-compliant port calls, total energy consumption (excluding OPS), and RFNBO use.

By 30 April, companies must finalise and record either the advance compliance surplus or the composition and allocation of a pool in the FuelEU database, after verifier approval.

The penalty must be paid by 30 June in order to receive the required Document of Compliance. The Commission will issue a delegated act on the method of payment.

In terms of compliance, the ISM company (the DOC holder) is responsible for ensuring compliance, and can pass on the cost to the charterer through commercial agreements.