Maritime industry ready and Fit for 55 – vol. 2: The FuelEU Maritime Initiative
This article is the second of a string of three articles aiming to explain how the Fit for 55 package affects shipping and the maritime industry. The first article covered the EU Emissions Trading System (ETS). In this second article, we will focus on the FuelEU Maritime initiative.
The Fit for 55-package
To achieve EU’s Paris climate goals, the EU Commission presented in December 2019 the European Green Deal, including a commitment to reduce greenhouse gas emissions by at least 55% by 2030 (compared to 1990 levels) and become carbon neutral by 2050. The EU Commission now intensifies the work and has on 14 July presented an ambitious package of legislative proposals called “Fit for 55 Package” which involves a range of sectors, also including the maritime sector.
With the Fit for 55 package, the Commission has introduced a set of proposals to revise and update EU legislation and to put in place new initiatives with the aim of ensuring that EU policies are in line with the climate goals. The form and content of the final reforms will depend on agreement between the member state’s governments, the European Parliament and the EU executive branch. One thing is however certain; along with several other sectors the maritime sector is designated to take greater responsibility for contributing to the climate goals.
Current regulations on the use of alternative fuel in the maritime sector
At the global level, the International Maritime Organisation (IMO)’s main set of rules on the environmental performance of vessels can be found in the International Convention for the Prevention of Pollution from Ships (MARPOL). MARPOL does however not contain any explicit requirements for vessels to use alternative fuels, although it includes certain regulations regarding reduction of emissions which indirectly would be an incentive to use alternative energy sources. (See: Fit for 55 – ETS )
In 2018, the IMO adopted the Initial Strategy on the reduction of greenhouse gas (GHG) emissions from vessels. This is yet to be implemented and discussions of the details and requirements are ongoing. The IMO Strategy recognises that developing alternative fuels is integral to reduce GHG emissions, but it is expected to take time before the IMO members states have agreed on a joint policy and regulation in this respect.
There is currently no EU regulatory framework which specifically addresses the use of renewable and low-carbon fuels (RLF) in maritime transport. It should however be noted that within the EU regulations, you find provision relating to supply, development of infrastructure and distribution of fuels, but without any obligation on their use. These includes:
- The Alternative Fuels Infrastructure Directive (AFID) which sets requirements for the deployment of a certain number of LNG bunkering points and shore side electricity supply.
- The Renewable Energy Directive (RED II) which puts obligations on fuel suppliers to ensure a minimum mandatory share of renewable energy.
- The Monitoring, Reporting and Verification Regulation (MRV), whereby shipping companies are required to monitor, report and verify the CO2 emission for vessels arriving at, within or departing from EU/EEA ports.
- The Sulphur Directive that sets a maximum limit on the sulphur content for fuels used by vessels in Europe.
FuelEU in short
The EU Commission has detected that a central part of the lack of use of alternative fuel in the maritime sector, is the lack of mature technology. The Commission acknowledges that it would take time to development such technology, but stress that it is urgent with a policy intervention.
FuelEU aims to increase the demand of RLF within maritime transport and thereby reduce the emissions from the sector. The FuelEU proposal introduces GHG intensity reduction requirements starting in 2025 and increasing in 5-years interval to 2050. The limit is determined against 2020 reference values and to be reduced by the use of RLF as follows:
- 2% by 2025
- 6% by 2030
- 13% by 2035
- 26% by 2040
- 59% by 2045
- 75% by 2050
The FuelEU proposal is technology neutral, meaning that the operators will have full flexibility with regard to the type of RLF they wish to use to achieve the required reductions.
Area of application
Similar to the proposed EU Emissions Trading System (ETS), the regulated entity under the FuelEU is the “shipping company”. This is typically the shipowner, technical manager or the bareboat charterer, or whomever that is responsible for the vessel’s operations in accordance with the ISM Code. Such entity will be held accountable to comply with the regulations, including reporting of compliance and payment of any required compensation amount.
If the FuelEU initiative is adopted, vessel operators will be obligated to comply with certain GHG intensity limits for the use of energy on board. This would apply for all vessels above 5000 GT, regardless of its flag. Thus it is considerable less vessels to be covered by the FuelEU than by the ETS, which was proposed to apply for vessels over only 500 GT.
As for the proposed ETS, FuelEU distinguishes between voyages within the EU and voyages outside the EU: If the proposal is adopted, the GHG limits will apply for all voyages within the EU. For voyages starting or ending at an EU port, the FuelEU regulations will apply for 50 % of the vessel’s energy usage. All energy used by vessels at berth in an EU port will be subject to the GHG limits. If the proposal is adopted, it is likely to expect that this would also be included in the EEA agreement and apply for EEA ports correspondingly.
Monitoring and compliance
FuelEU will build on the EU MRV system to monitor, verify and report GHG emissions. It is proposed that compliance will be checked on an annual basis (and not voyage-per-voyage), allowing more flexibility to the ship operators. Following the implementation of the FuelEU initiative, the MRV reporting is proposed extended to also include reporting of alternative energy sources such as electric propulsion and other emissions than Co2.
To stimulate “over-achievement”, the proposal allows for voluntary transfer of access compliance points. In practice, it is expected that most of the transfer are likely to happen within the same company or group, but it shall also be allowed to transfer and trade such points between different companies.
On-shore power supply
In addition, the FuelEU Maritime propose that, starting in 2030, certain vessels (mainly passenger vessels and container vessels) shall be required to use onshore power supply when at berth – unless another zero-emission technology are used.
In this respect, it should be noted that the Fit for 55 also includes certain revisions to AFID, including requirements to ensure that vessels have access to electricity supply while at berth in an EU/EEA port.
According to the proposal, the following administration action will be required:
- Each vessel must submit an annual energy compliance plan describing the fuels and technology the vessels is planning to use.
- Each vessel must submit an annual energy report, including onshore power supply.
- Excess or negative compliance points to be transferred, or compensation amount to be paid as needed.
- All vessels shall carry a document of compliance and must cooperate during audits/inspections.