Upcoming EU Regulations and Their Impact on Maritime Shipping

In January 2024, the European Union extended its Emissions Trading System (EU ETS), the bloc’s cap-and-trade system, to include the maritime sector’s greenhouse gas emissions (carbon dioxide, methane, and nitrous oxides). For 2024, this expansion applied to 40% of the maritime sector’s emissions, specifically from cargo ships greater than 5,000 GT. Stakeholders will have to surrender the proper allowances in September 2025 to cover these emissions.  Starting in January 2025, 70% of the maritime sector’s emissions will be covered by the EU ETS. This expansion will likely increase the carbon costs for shippers and spur the adoption of energy-efficiency technologies and alternative fuels. Allowances for the 2025 emissions will need to be surrendered by September 2026.

FuelEU

Starting in 2025, the European Union’s FuelEU regulation will come into effect. The regulation is a complement to the EU ETS and requires ship operators calling at European ports, regardless of their flag, to reduce the greenhouse gas emissions intensity of the fuels used in their vessels. It is akin to a clean fuel standard for maritime vessels, in that it sets maximum limits for the yearly GHG intensity of energy used by ships over 5,000 gross tonnage, thereby encouraging the adoption of alternative fuels. The regulation covers carbon dioxide, methane, and nitrous oxide emissions on a well-to-wake basis. Similar to the EU ETS, if the route of the ship is intra-EU, 100% of the GHG emissions are covered by FuelEU. If the route is between the EU and non-EU countries, 50% of the GHG emissions are covered by FuelEU.

Alternative Fuel Availability for Maritime Shipping

The most common alternative maritime fuel globally is B24 (i.e., 24% bio-components); however, the Rotterdam port in Europe frequently supplies B30, a fuel with 30% bio-components. Many stakeholders expect the majority of alternative maritime fuels to be composed of used cooking oil methyl ester (UCOME). Platts data from October found the price of B30 UCOME was around $879 per metric ton, while VLSFO was around $630 per metric ton. Despite these price differences, advancements in fuel and technology are expected to reduce costs, promote the use of alternative fuel types, and unlock new efficiencies for the maritime sector.