LR: Fleet utilization, routing can help shipowners better navigate new EU regulations

Deploying fleets efficiently along specific routes, combined with educated fuel and technology choices will be crucial for navigating new EU regulations, according to a new Lloyd’s Register report.

Since the beginning of this year, the maritime sector has been subject to the world’s first carbon price on shipping.

The extended EU Emissions Trading System (EU ETS), which came into force on January 1, 2024, sets an annual absolute limit on emissions of greenhouse gases (GHG) for vessels of 5,000 gt and above calling at EU ports. The introduction of a carbon tax seeks to cover the shipping industry’s emissions and encourage more sustainable practices.

The ‘Shipping and Fit for 55’ report, which offers insights for owners, operators, managers and charterers shaping their strategies to address shipping’s first emissions pricing mechanism, found that ensuring efficient vessels are routed to trades serving European Economic Area (EEA) ports is a significant step that operators can take to minimize exposure to carbon pricing and to contribute to the EU’s emission reduction targets.

However, the guide shows that using such vessels will be easier in some shipping segments than others due to the nature of their deployment, trade or commercial factors. There will also be a knock-on impact on chartering markets as those in Europe seek more efficient vessels.

The report stresses how important it is for operators to understand how to account for emissions for different fuels. Under the two regulations, early adopters of zero or near-zero carbon fuels and wind-assisted propulsion will have a significant advantage in their emissions accounting compared with those using traditional fuels.

Purchasing EU Allowances (EUA) or carbon certificates, will also be a new function for shipowners and operators. With the requirement to buy and sell emissions allowances under EU ETS representing a first step into carbon trading for many owners, several factors will affect when to purchase and how allowance exposure should be factored into business decisions.

The report outlines that if shipowners do not purchase EUAs at the correct time, they could be forced into buying these at an inflated price, conversely, purchasing EUAs too early can result in them losing value and companies may not be able to recoup their initial investment.

“The Shipping and Fit for 55 report provides members of the maritime value chain with a comprehensive guide, helping operators and owners identify the scope for optimising compliance by exploring the operational decisions they can take and how they are impacted by the regulations. Highlighting choices and implications in key areas, such as routing and decarbonisation technology will help owners, operators and charterers understand where they can find opportunities amidst the complexity of the new regulatory landscape,” David Lloyd, Programme Director – Energy Transition, Lloyd’s Register, said.