Normec Verifavia MD sheds light on regulatory compliance challenges as shipping readies for pivotal shift in 2025

November 21, 2024, by Naida Hakirevic Prevljak

From 2025, the shipping industry will usher in a new era of more stringent regulations with environmental pieces woven into it. Adhering to these regulations is expected to drive a shift towards achieving net zero emissions by 2050.

Yuvraj Thakur, Managing Director of Normec Verifavia

Apart from key regulations that came into effect in 2023 and 2024, new regulations—both global and regional—are set to enter into force. The new regulatory landscape aims to ensure a more sustainable future for the maritime sector.

Specifically, new regulations that will be applied globally by the International Maritime Organization (IMO) include amendments (electronic certificates) to the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW), the IMSBC Code amendments, MARPOL Annex I – special area updates, MARPOL Annex VI – Energy Efficiency Design Index (EEDI) Phase 3, amendments (ballast water record book) to the Ballast Water Management Convention (BWM), amendments (new emission control area and other) to MARPOL Annex VI as well as the Hong Kong Convention on Ship Recycling.

In addition to global regulations, several regional ones will enter into force in the coming months. The most important initiative is understood to be the FuelEU Maritime. Set to be implemented from January 1, 2025, it introduces a series of regulatory measures aimed at reducing the GHG intensity of fuels used by ships operating in EU waters. It was adopted by the EU as part of the union’s “Fit for 55” package to reduce greenhouse gas emissions in the maritime sector, by promoting the use of renewables and low-carbon fuels on ships, on a well-to-wake basis as well as future requirements for the use of shore power.

Faced with the new requirements, many ship owners and operators need to deal with compliance challenges because emissions-related regional regulations add a new layer not only of standards but also of confusion.

In an interview with Offshore Energy, Yuvraj Thakur, Managing Director of France-based independent emissions verification provider Normec Verifavia, has thrown more light on the labyrinthine reality in the context of new regulations. To remind, back in 2022, Dutch testing, inspection and certification organization Normec acquired the majority stake in the French company Verifavia.

With the FuelEU Maritime regulation set to be fully implemented on January 1, 2025, can you explain to our readers what does this mean for shipping companies? Which challenges will they face when it comes to emissions monitoring and reporting? What aspects should a ship’s verified annual report include?

Thakur: With the upcoming FuelEU Maritime set to come into effect on January 1, 2025, shipping companies under the ISM code must submit an assessed FuelEU Monitoring Plan through the THETIS platform. This is especially important for vessels using zero-emission technologies, such as battery or wind-assisted propulsion systems, where the specific details of these technologies must be included in the plan.

Key challenges that shipping companies face include a lack of clear regulatory understanding at the voyage level, the need for more robust emissions data reporting systems, and ensuring the accurate flow of information between companies and verifiers. Gathering the right evidence for operational practices and fuel certifications, when required, is also crucial to ensuring compliance.

The ship’s annual report for FuelEU must include details such as fuel consumption by type, GHG intensities for each fuel used, fuel consumption for ice-class ships operating in icy conditions, amount of energy used at OPS, amount of energy used from RFNBOs, the number of non-compliant port of calls (only for container ships) and compliance balances. These reporting requirements are in addition to the data already tracked under EU MRV and EU ETS regulations.

How can vessel pooling help shipowners avoid or minimize costs of complying with FuelEU Maritime?

Thakur: Under the FuelEU Maritime regulation, vessel pooling provides an effective way for shipowners to reduce compliance costs. By pooling compliance balances, companies can achieve overall compliance across multiple vessels, allowing ships with emissions below regulatory limits to offset those that exceed them.

Penalties for non-compliance can be substantial, reaching €2,400 per ton of very low sulphur fuel oil (VLSFO) equivalent. This could lead to significant compliance costs for a single vessel that exceeds its energy intensity limit. Hence pooling can help shipping companies avoid or minimize FuelEU penalties.

How will the inclusion of vessels smaller than 5,000 GT as well as offshore ships in EU MRV add to the confusion when it comes to the accuracy of emissions reports?

Thakur: For general cargo ships below 5,000 GT, all reporting parameters remain unchanged. However, there is some concern around regulatory understanding, particularly the requirement for general cargo ships to report their deadweight carried as cargo for EU MRV compliance.

For offshore vessels, the main challenge involves interpreting EU MRV’s applicability to different offshore ship types, as highlighted in the draft amendment dated 31 July 2024. Another challenge is the updated definition of a “port of call” for offshore ships, which now includes vessel stops for crew relief. This is different from the berth-to-berth concept used for other ship types.

The offshore industry needs greater clarity on which of its operations fall within the scope of EU MRV. They are likely to expect a comprehensive guidance document from the EU to address these specific concerns.

Can you explain to our readers in brief the FuelEU-related penalties? On the other hand, can you tell us more about the reward system (e.g. for wind-assisted propulsion)?

Thakur: Under the FuelEU Maritime regulation, penalties are imposed on ships exceeding greenhouse gas (GHG) intensity limits. For example, a container ship using tradition fuels, achieves a GHG intensity of 91.49 gCO₂ eq/MJ against a target of 89.34 gCO₂ eq/MJ for the reporting year 2025, would face a penalty of roughly €850,000 for non-compliance.

Wind-assisted propulsion impacts GHG intensity calculations under the FuelEU Maritime regulation. It introduces a reward factor based on how much power comes from wind system compared to the total propulsion power. This reward factor can range from 0.99 to 0.95, depending on how effectively the wind power is utilized ranging from 5% to 15%.

Back in 2021, Normec Verifavia launched the world’s first real-time Carbon Intensity Indicator (CII) Dashboard. How has this dashboard helped the shipping industry navigate the new regulatory landscape? How many ships have had their emissions verified by Normec Verifavia?

Thakur: Understanding the importance of continuous verification for emissions data, we launched the CII dashboard, and now cover all regulations like FuelEU, EU ETS, EU MRV, UK MRV, and IMO DCS. Shipping companies acknowledged the dashboard, but the real essence of continuous verified emissions data is being appreciated now that compliance costs are rising.

With more than 2200+ vessels verified, and 1000+ EU ETS Verified Voyage Statements generated on demand and accepted worldwide, is a testament to our commitment to trust, transparency and innovation.

One of the main features of the dashboard is a calculator which can forecast a vessel’s CII rating for a single voyage, time period or reporting period. As the emission reduction rates for each year increase compared to 2019 levels, the calculator provides a roadmap for shipowners to understand when vessels, and specific voyages will comply with CII regulation, and to anticipate any changes required to meet compliance. The CII dashboard requires very little internet bandwidth and offers a clear, efficient and accurate management system for emissions data.

Can you tell us more about your carbon insetting verification service? How can carbon insetting help shipping companies meet the current and upcoming regulations? Are shipping companies aware of carbon insetting benefits or does it still remain an ‘uncharted territory’? How many vessels have sought verification of their carbon insetting initiatives from Normec Verifavia?

Thakur: Carbon insetting, which focuses on reducing emissions within a company’s own value chain, remains relatively underexplored in the shipping industry. Insetting provides a more direct approach for shipping companies to achieve their greenhouse gas (GHG) reduction targets.

Normec Verifavia has already verified 6+ Insetting Interventions and Low Carbon Fuel Programs for 5 leading shipping companies, bunker service suppliers and 4 logistics service providers wherein verified carbon insets can be claimed by stakeholders to reduce their GHG emissions.

As the first verifier to be accredited by Smart Freight Centre for their Conformity Assessment Scheme, Normec Verifavia participated in the pilot phase for Market based Measures framework specification that will provide shipping companies an avenue to transparently document, report and verify their insetting activities such as Book and Claim programs.

Can you comment on the yet-to-be agreed global IMO carbon levy and what changes will it bring, speaking from the verification perspective?

Thakur: The proposed global carbon levy by the International Maritime Organization (IMO) aims to address the 3% of global greenhouse gas emissions from shipping. From a verification perspective, shipping companies must submit emissions data for continuous verification to increase confidence in their emissions data. As part of Market-based Measures, IMO MEPC 82 session focused on a legal framework for GHG emissions pricing, set for adoption by 2025 and implementation by mid-2027.

What are Normec Verifavia’s plans for the future (new innovations, services, potential mergers and acquisitions) to support the global effort to decarbonize shipping?

Thakur: Normec Verifavia is committed to expanding its role in emissions verification. We are continuously improving our emissions dashboard which is connected to 15+ IT systems for continuous verification of emissions data, including EU MRV, UK MRV, IMO DCS, EU ETS, and FuelEU Maritime to accommodate regulatory updates.

Additionally, we have completed insetting projects and carbon footprint assessments for the transport sector at large including maritime companies, bunker service providers, logistics service providers in line with ISO 14083, GHG Protocol and Guidance material by Smart Freight Centre.

As the industry transitions to new technologies and alternative fuels, and as the EU develops regulations for Emissions Trading and Carbon Capture and Storage initiatives, we recognize the importance of transparency in these efforts. We will therefore be working on ensuring trust in emissions data across the entire value chain for all regulatory and voluntary schemes, be it CBAM, insetting or EU ETS II.