The financial implications of FuelEU Maritime are commanding the attention of shipping companies as they confront potential fines for failing to meet greenhouse gas (GHG) intensity reduction targets. OceanScore has pinpointed the segments most likely to be affected.
According to OceanScore, vessels in the passenger/cruise, container, RoPax, bulker, and tanker segments will face significant cost exposure from the complex regulation set to take effect on 1 January of next year, despite the modest initial target of a 2% cut in GHG intensity.
Based in Hamburg, OceanScore’s data analytics team estimates that the shipping industry will incur total FuelEU penalties of US$1.4 billion in 2025. This estimate is derived from analyzing the 13,000 vessels over 5000gt trading within and into the EU/EEA that fall under the regulation, using trading patterns and fuel mix data from 2022, the most recent full year available.
Using proprietary data modelling that incorporates AIS data, Thetis emissions data, bunker intelligence, and advanced analytics/AI, the team has calculated FuelEU compliance balances and resulting penalties for each vessel. They considered the likely fuel mix for each vessel between EU ports, for journeys to and from the EU, and in ports.
Vessels that fail to achieve the initial 2% reduction target, based on a 2020 baseline of 91.16 gCO2e per megajoule (MJ) of average well-to-wake GHG intensity from fleet energy consumption, will face a penalty of US$2,596 per tonne of VLSFO-equivalent. This GHG intensity requirement applies to 100% of the energy used on voyages and port calls within the EU/EEA and 50% of voyages into and out of the bloc.
Much like the EU Emissions Trading System (EU ETS), the container segment will bear the largest FuelEU costs, accounting for 29% of the total penalties, followed by RoPax at 14%, and tankers and bulkers 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,” stated Albrecht Grell, managing director of OceanScore.
“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.”
OceanScore has discovered that liabilities per vessel will vary significantly across different segments due to the increasingly diverse fuel options, including the growing use of biofuels and LNG.
Passenger vessels will incur the highest penalties, averaging US$562,000 per vessel annually, followed by RoPax at US$519,000 and RoRo at US$339,000. Container ships will face a lower average penalty of US$231,000, according to OceanScore.
Grell highlights that there are also significant discrepancies within these segments. Some ships in the passenger and RoPax categories are facing penalties between US$1.9 million and US$2.7 million, while certain container ships could see payment obligations nearing US$1,08 million. This variation is largely due to higher energy consumption driven by vessel size and trading profile.
Penalties will stem from compliance deficits for vessels using conventional fuels. However, surpluses estimated at US$724 million will primarily be generated by vessels using LNG and LPG, which have significantly lower carbon intensity.
LNG carriers will account for 78% of the total market surplus, with gas carriers contributing 8%, and another 8% coming from container ships that have recently adopted alternative fuels.
Considering the estimated compliance surplus, the net cost of FuelEU penalties for the shipping industry from 2025 will be around US$735 million. This suggests that pooling vessels can potentially reduce the gross burden by roughly half.
In segments that typically use conventional fuels with similar carbon intensities, such as HFO, LFO, or MDO, penalties will be roughly proportional to overall fuel consumption, similar to the EU ETS costs.
Initially, the costs of FuelEU for most conventionally fueled vessels, before pooling, will be about one-third of those associated with the EU ETS next year, when the latter regulation will have a 70% phase-in. However, FuelEU is expected to become significantly more expensive as the GHG intensity reduction requirement increases to 6% by 2030 and then accelerates to 80% by 2050.
“It is therefore incumbent on shipowners to define their strategies not only towards fuel choices and the use of onshore power but also towards handling of residual compliance balances such as pooling, banking and borrowing of balances, to mitigate the financial impact of FuelEU. However, pooling will also come at a cost, while banking and borrowing will incur interest costs and only push liabilities into the future,” explained Grell.
He further emphasized that compensating between different shipping companies through pooling will effectively redirect cash flow away from the EU that would otherwise have been accrued from FuelEU penalties. This effect is intentionally designed by regulators to incentivize early adopters of clean fuels.
Another factor reducing potential revenue for the EU under this regulation is that the compliance gap has narrowed to just 1.6% by 2022, as the average GHG intensity from shipping decreased by 0.4% to 90.82 gCO2e per MJ. This reduction is largely due to increased calls of LNG carriers to Europe following the cessation of gas supplies from Russia via pipelines after the Ukraine invasion. Given this trend and the increasing use of biofuels, it is likely that the 2% compliance gap will be closed before the initial tightening of reduction targets in 2030.
Furthermore, Grell highlighted that the primary focus for shipping companies, particularly at this early stage when cost exposure is relatively minimal, should be understanding the complexity of the regulation and addressing the risks stemming from the discrepancy between the party liable for penalties—the Document of Compliance (DoC) holder or potentially the shipowner—and the entity responsible for emissions, typically the charterer.
“As well as having cost oversight, companies require reliable monitoring and reporting mechanisms with high-quality emissions data. They must also have in place complex contractual arrangements and sound administrative processes to manage compliance and mitigate the financial consequences of the new regulation,” concluded Grell.
