DNV spotlights strategies for cutting FuelEU Maritime compliance costs

December 6, 2024, by Ajsa Habibic

With all eyes on the forthcoming FuelEU Maritime regulation, which is set to enter into force on January 1, 2025, vessel owners are faced with the challenges of regulatory understanding and compliance costs. While compliance with upcoming regulations will be expensive, applying certain strategies and measures can significantly reduce the cost, according to a new white paper from classification society DNV.

Illustration only. Photo by Offshore Energy

The FuelEU Maritime rules mandate stringent greenhouse gas (GHG) emission intensity requirements for ships over 5,000 gross tonnage (GT) transporting cargo or passengers for commercial purposes in the European Union/European Economic Area (EU/ EEA), starting from January 1, 2025.

GHG emissions are calculated from a well-to-wake perspective, including onboard combustion and emissions related to the extraction, cultivation, production, and fuel transport. The regulation also includes provisions for crediting ships using wind-assisted propulsion.

As the new regulation’s starting date approaches, DNV has published a new white paper titled “FuelEU Maritime – Requirements, compliance strategies, and commercial impacts”, outlining requirements and compliance strategies for shipowners.

The white paper provides an overview of the FuelEU Maritime regulation and insight into strategies to reduce compliance expenses and avoid major penalties.

It also includes a case study of an 80,000 dwt bulk carrier operating in EU waters to highlight a range of different compliance strategies such as paying penalties, using energy-efficient measures, blending in bio-MGO, bio-LNG, e-methanol, or blue ammonia, using shore power, using wind-assisted propulsion, MGO vessel borrowing compliance balance, among others.

The analysis showed how the adoption of the most cost-effective strategy can result in savings of up to 16% or $21 million over a vessel’s lifetime compared to using bio-MGO as a compliance option.

Paying the penalty cost was found to be the most expensive option, especially if selected as the compliance option for all consecutive time periods. On the other hand, using LNG and bio-LNG emerged as the least costly compliance strategy since it gives a lower well-to-wake GHG intensity than required during the first 10 years of the period compared to MGO-fueled vessels.

This enables the LNG-fueled vessel to avoid having to use expensive low GHG intensity fuels until 2035. If it is banking compliance surpluses in the first years, the LNG case vessel can potentially achieve FuelEU compliance by running on fossil LNG over its whole lifetime from 2025 to 2044, DNV explained.

Another key takeaway from the analysis indicated that energy-efficiency measures can significantly reduce the costs of fuel, EU ETS, and FuelEU compliance, resulting in a lower total cost in the ‘pay-the-penalty’ and ‘blend in bio-MGO’ strategies. However, it was emphasized that these alone can not act as a FuelEU compliance measure.

The report goes on to provide the following recommendations for shipowners:

To start preparing the organization and fleet for FuelEU Maritime and identify the most optimal compliance strategy;
To consider long-term fuel offtake agreements to ensure access to low GHG intensity fuels;
To consider energy-efficiency measures to reduce fuel and compliance cost; and
To include provisions for FuelEU Maritime in contractual terms and ensure access to verified emissions data.

A key point emphasized in the report is that the International Maritime Organization (IMO) is also set to introduce similar regulations in the near future, with a net-zero framework expected to be adopted in the second half of 2025 and come into force around mid-2027.