With the FuelEU Maritime regulation set to take effect on 1 January 2025, shipping companies across Europe are bracing for a wave of new penalties tied to carbon intensity reduction targets. The regulation aims to cut the greenhouse gas (GHG) intensity of energy used on ships, with increasingly stringent targets every five years. Shipping lines are left grappling with how to meet these requirements while balancing compliance costs.
The regulation applies to all energy used on voyages and port calls within the EU, and even covers 50% of the energy used on voyages in and out of the region. Companies can either pay a FuelEU penalty or take proactive steps to reduce their GHG intensity within acceptable limits. Among the solutions are adopting biofuels, using LNG/LPG, or exploring the pooling mechanism, where ships that overperform can help offset underperforming vessels.
The Costs of Non-Compliance: A Growing Concern
While these strategies offer paths to compliance, a significant number of shipping companies, particularly smaller operators, are simply planning to pay the penalty instead. Albrecht Grell, Managing Director at Hamburg-based maritime intelligence company OceanScore, warns that this approach is short-sighted. “Not only will penalties escalate, but pushing compliance deficits into future years through borrowing will incur interest and prove increasingly costly,” he explained.
The current penalty of €2,400 per tonne of very-low sulphur fuel oil equivalent (VLSFOe) over the intensity targets is set to rise by 10% annually, reaching €3,360 by 2029 for those that remain non-compliant. For shipping companies already under financial pressure, these increasing costs could be crippling.
Exploring Viable Compliance Strategies
Grell urges companies to explore biofuels and pooling as more commercially viable ways to manage compliance. The market dynamics driving the availability of surplus capacity will dictate the price of pooling slots, offering both risks and rewards for those who understand them. Grell emphasised that the pooling mechanism doesn’t just help a company manage its own fleet’s deficits but also allows shipowners to monetise surplus capacity by sharing it with third-party vessels—a “commercially sound option” that could offset the higher costs of compliant fuels.
Friederike Hesse, co-founder and Managing Director of maritime carbon solutions platform zero44, highlighted that the optimal compliance strategy will vary for each company. Key factors include trading patterns, EU exposure, sustainable fuel availability, and the fluctuating costs of traditional versus compliant fuels. Hesse noted, “Many of these factors change throughout the year… Optimising FuelEU will be a continuous effort, requiring companies to track all available compliance options and adapt their strategies dynamically.”
The Critical Role of Real-Time Data and Supply Chain Visibility
In an increasingly complex regulatory landscape, real-time visibility and supply chain monitoring tools are becoming essential. For shipping companies, logistics service providers (LSPs), and beneficial cargo owners (BCOs), understanding how fluctuations in compliance options, fuel prices, and carbon intensity impact their operations is critical. Implementing data-driven software solutions can help stakeholders make informed, timely decisions to avoid penalties and maintain profitability.
These platforms enable continuous monitoring of compliance performance, allow companies to predict future deficits, and assess the real-time economic impact of different strategies. The ability to adapt quickly to market conditions, while staying aligned with environmental regulations, is not just an operational advantage but a strategic necessity.
The Path Ahead: Balancing Costs, Compliance, and Climate Impact
As the FuelEU Maritime regulation looms, the shipping industry faces a pivotal moment. Whether by adopting cleaner fuels, leveraging pooling mechanisms, or integrating real-time visibility tools, companies must find the balance between cost-efficiency and regulatory compliance. The right strategy could not only save costs but also open new opportunities in an increasingly sustainability-driven market.