This article covers FuelEU Maritime (EU Regulation 2023/1805), which sets binding limits on the greenhouse gas intensity of fuels used by commercial ships over 5,000 gross tons carrying passengers or cargo, regardless of flag.
The regulation currently applies within the EU and will extend to the European Economic Area (EEA): Iceland, Liechtenstein, and Norway (except Svalbard).
Part of the EU’s ‘Fit for 55’ strategy, the regulation aims to decarbonize the maritime sector with progressive emission reductions starting in 2025, reaching 80% by 2050.
The regulation is technologically neutral, based on objectives/performance and the ‘Well-to-Wake’ life-cycle principle: this involves using various fuels and energy sources, chosen according to compliance strategies that consider different energy systems and actual ship operations.
FuelEU complements the maritime ETS in Europe (in force since 2024) and internationally complements IMO regulations under development through the Net Zero Framework—an international decarbonization framework aimed at pricing maritime emissions, currently stalled due to U.S. opposition.
From the shipping companies’ perspective, in addition to the January 31 deadline for reporting data, the April 30 deadline for the verifier to review and approve flexibility mechanisms is also very important.
Shipping companies are therefore authorized to manage FuelEU compliance through a combination of flexibility mechanisms designed to optimize compliance with greenhouse gas intensity reduction targets and to encourage investment in low-emission fuels and technologies.
The first flexibility mechanism is banking, i.e., the setting aside of credits resulting from the use of fuels with a greenhouse gas intensity below the annual limit set by FuelEU.
Excess reductions in greenhouse gas intensity achieved by a ship can be “saved” to offset future deficits of the same ship in subsequent reporting periods. The surplus has no expiry date and follows the ship even if it changes shipping companies.
The second flexibility mechanism is borrowing, i.e., borrowing the fuel quota to be reduced.
If the ship is unable to reduce its fuel intensity in order to comply with FuelEU, it may request to borrow up to 2% of the surplus required for the following year, which must then be repaid with a 10% penalty. This option cannot be used for two consecutive years.
The third flexibility mechanism is pooling, which allows the aggregation of surpluses and deficits between ships, even from different shipping companies. This is the most important flexibility mechanism and the most relevant for FuelEU compliance.
Ships can choose to enter a pool to reduce or offset their deficits or to allocate their surplus. Pooling agreements must be jointly agreed upon by all participants, validated by an accredited verifier, and registered in the THETIS-MRV system, managed by EMSA, by April 30 of the year following the reference year.
Although pooling offers potential efficiency gains, it also requires accurate fuel data, robust governance to coordinate shipping companies and clearly define ships in deficit and surplus, and a clean calculation of the financial situation of pool participants.
With regard to the allocation of compliance within a pool, ships may exit with a deficit if the pool’s overall compliance balance remains zero or positive. It is possible to set up a pool composed exclusively of ships that are already compliant to redistribute the compliance surplus.
Penalties are applied when a ship does not achieve a compliance balance of at least zero. The penalty increases progressively by 10% for each subsequent reporting period and is approximately €58/GJ for non-compliant energy used.
Flexibility mechanisms reduce the risk of penalties, giving ships greater confidence in their compliance. However, they increase the complexity of the system, especially in terms of administrative and data governance rules, and the risk of insufficient or opaque data on the fuels used.
