FuelEU Maritime Regulation: Container Sector Faces Major Penalties

A recent analysis from Germany indicates that the container sector will bear the brunt of penalties from the upcoming FuelEU Maritime regulation. This sector is expected to account for nearly a third of all payouts. The FuelEU Maritime regulation, which comes into force at the start of next year, is focusing the minds of shipping companies as they face potential penalties for non-compliance with greenhouse gas (GHG) intensity reduction targets.

Vessels failing to meet the initial 2% reduction target relative to a 2020 baseline will be hit with a penalty of €2,400 per tonne of VLSFO-equivalent. The GHG intensity requirement applies to 100% of energy used on voyages and port calls within the EU/EEA and 50% of voyages into and out of the bloc.

OceanScore has identified the segments set to be hit hardest. The company forecasts that the shipping industry as a whole will incur total FuelEU penalties of €1.345 billion in 2025. This estimate is based on an analysis of the 13,000 vessels over 5000 GT trading within and into the EU/EEA that are subject to the regulation.

According to OceanScore, the container segment will be forced to pay the most, accounting for 29% of gross penalties. This is followed by ropaxes at 14%, with tankers and bulkers each at 13%.

“It is critical for shipping companies to determine a baseline for expected FuelEU costs to secure proper planning and budgeting processes to compare different mitigation options, as well as to decide what to do with outstanding compliance balances,” said OceanScore managing director Albrecht Grell. “This will require, to a higher degree than the EU ETS, a corporate strategy to determine how to reduce the compliance balance/deficit, how to commercialise a surplus, and deal with deficits that remain.”

Broader Implications

The FuelEU Maritime regulation which is part of the EU’s broader effort to reduce GHG emissions from the maritime sector, is expected to increase the cost of shipping operations in the EU through several mechanisms:

  • Mandatory Use of Onshore Power Supply (OPS)

 Starting in 2030, passenger and container ships at berth in major EU ports for more than two hours must use OPS or equivalent technologies. This will require significant investments in port infrastructure and onboard equipment, increasing capital expenditures for ship owners.

  • Limits on GHG Intensity

The GHG intensity threshold will be subject to percentage reductions compared to a 2020 reference value, starting at 2% in 2025 and reaching 80% by 2050. This will drive demand for more expensive renewable and low-carbon fuels, increasing fuel costs.

  • Administrative Costs

 Compliance with the reporting requirements will add administrative costs, further contributing to the overall operating expenses of shipping companies.

Conclusion

The FuelEU Maritime regulation is set to have a substantial financial impact on the shipping industry, particularly the container sector. While the regulation presents significant challenges, it also offers an opportunity for the maritime industry to innovate and adopt more sustainable practices. Effective strategic planning and budgeting will be crucial for shipping companies to navigate the regulatory landscape and manage compliance costs.

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