FuelEU Maritime: Delayed incorporation in Norway

The regulation sets out a framework for reducing greenhouse gas emission in maritime transport, for voyages to, from, and between EU (and eventually EEA) ports of call. However, until the regulation is approved by the EEA committee, the regulation will not take effect in Norway. This will affect the reporting requirements under FuelEU Maritime for voyages to, from, and between Norwegian ports of call.

The object of FuelEU Maritime is to increase the use of renewable and low-carbon fuels and substitute sources of energy in the maritime sector, by setting out restrictions on the GHG (greenhouse gases) intensity of energy used on board ships which will gradually become more stringent until 1 January 2050. 

FuelEU Maritime applies to all ships above 5000 GT transporting passengers or cargo for commercial purposes to, from, and between EU ports of call. Upon the EEA's approval of the regulation, and Norway/Iceland's incorporation, FuelEU Maritime will correspondingly apply to EEA port of calls. Several types of ships are for the time being exempted from the regulation, for instance, certain fishing vessels and offshore vessels.

The key mechanism under FuelEU Maritime is that the yearly average GHG intensity of the energy used on board ships, shall be monitored and reported. For the fuel, this is based on a "well-to-wake" perspective which considers the entire emission cycle of the consumed fuel, from extraction to combustion. 

The reporting requirement applies to voyages made to, from, and between EU (and eventually EEA) "ports of call",[1] as well as the energy used while the ship is at berth.

FuelEU Maritime prescribes a reduction in the yearly average GHG intensity of energy used on board the ship by establishing a target reduction framework. The target is calculated based on a reference value,[2] where reductions must be made according to the table set out below. 

Ships that do not meet the limits on the yearly average GHG intensity are subject to a penalty proportionate to the extent of their non-compliance (the "FuelEU Penalty"). If a ship has a compliance deficit for two or more consecutive reporting periods, the FuelEU Penalty will increase by 10 percentage points for each consecutive year of non-compliance.[3]

The regulation requires the shipowner or any other organisation or person which has assumed responsibility under the regulation, such as the manager or the bareboat charterer (the "ISMCompany"),[4] to report on each ship's performance during a reporting period. Ships with a compliance surplus on their GHG intensity for a reporting period may bank the surplus for the following reporting period. Conversely, if a ship has a compliance deficit, the ISM Company may (with certain limitations and a multiplier) borrow a corresponding amount of the compliance balance for the following reporting period. 

FuelEU Maritime allows ISM Companies to register their ships into compliance pools, where overperforming and underperforming ships must have an aggregate positive compliance balance. The regulation allows only to bank compliance surpluses within the pool and prohibits borrowing from the following year.[5] In order to comply with FuelEU Maritime, companies must assess whether they are best served by having their ships operating as stand-alone ships or placing them in a pool.

Until the EEA committee has approved FuelEU Maritime and Norway has incorporated the regulation, Norwegian "port of calls" will be considered non-EU ports. During this period, only half of the energy used shall be reported for voyages between EU and Norway. For voyages between Norwegian ports, as well as Icelandic ports and between Norwegian and Icelandic ports, FuelEU Maritime will not apply. 

FuelEU Maritime may affect both ongoing and future charterparties and ship management agreements. We therefore encourage affected parties to assess if any measures should be implemented to handle the possible implications of the regulation and remain available to provide guidance and assist in this relation. 

[1] FuelEU Maritime Regulation, Art. 3, no. 10.

[2] 91.16 g of CO2 equivalent per MJ.

[3] FuelEU Maritime Regulation, Art. 23.

[4] FuelEU Maritime Regulation, Art. 3, no. 13. 

[5] FuelEU Maritime Regulation, Art. 21.