FuelEU Maritime

Managing the commercial impact of FuelEU Maritime

The impact of the FuelEU Maritime regulation goes beyond annual compliance. It also leaves its mark within commercial processes and contracts.

FuelEU Maritime compliance strategies

To comply with the new regulation, there are several strategies which shipping companies can follow:

Shipping companies that are able to achieve a compliance surplus can bank this surplus and use it to achieve a compliant FuelEU balance in the coming years for the same vessel. Alternatively, you can pool a single vessel’s compliance with other vessels and therefore compensate and help to achieve compliance on a fleet level.

In the event of a compliance deficit, shipping companies can borrow up to 2% of next year’s compliance balance. However, this advancement needs to be compensated for in the following year with 10% interest. Alternatively, you can pool vessels to achieve compliance on an average level, where the surplus from one vessel balances the deficit of another.

Ultimately, should none of the above result in a compliant FuelEU balance, the technical manager or the ISM company, respectively, will have to pay the imposed fine to the national authorities.

Managing the commercial dimensions of FuelEU Maritime

In the shipping supply chain, in which complex and various sets of commercial agreements are common, shipping companies will need to understand their current status and be able to simulate their expected end-of-year balance well ahead of time. This will enable you to plan operational strategies and update commercial contracts to align with the compliance strategy.

Commercial transactions and sharing of emissions data to manage the impact of FuelEU Maritime

Different entities in the shipping supply chain may have varying responsibilities under FuelEU Maritime. It is important for each party to understand their potential obligations and consider how these might affect their commercial agreements.

Technical manager

Under the current understanding of the regulation, the technical manager or ISM company may be responsible for the FuelEU Maritime compliance balance. This potentially creates a situation in which they may bear compliance and financial liability towards national authorities within the EU, despite potentially lacking direct influence on fuel choices  

As a consequence, the technical manager secures coverage for any costs related to FuelEU Maritime from the shipowner. To determine and agree on these costs, however, both parties need trusted and verified emissions data, serving as the basis for FuelEU Maritime management on a commercial level as well as for compliance.

Shipowners

Shipowners and charterers may need to review and potentially update their commercial agreements to address FuelEU Maritime compliance and related costs.

In a scenario where the charterer manages the fuel choice, and hence has operational control over the FuelEU Maritime compliance balance, it may be the case that shipowners and charterers need to review and potentially update their commercial agreements to address FuelEU Maritime compliance. This could involve various approaches to allocating costs and benefits related to compliance. Different terms and conditions could be applied depending on the type of charter contract – from fix cost as part of the tariff or charter rate to compensation based on the actual compliance balance at the end of the charter period.

In this case, to not be left with the financial liability, the shipowner could manage the FuelEU balance and its commercial transactions throughout the year, for instance, so that the total number of transactions equals the annual balance calculated for compliance purposes.

Charterers

What’s more, the charterer would seek commercial terms that allow them to secure compensation for any compliance surplus that they have earned for the vessel and the vessel owner during the period of the charter contract.

Support from DNV

In all cases, a trusted and shared source of verified emissions data is needed to calculate the compliance balance. DNV offers tools and services that can assist in monitoring and managing FuelEU Maritime compliance-related data. Continuous data and monitoring of the current FuelEU Maritime compliance balance is needed to actively manage performance and facilitate commercial contracts, or to determine charter or freight rates.

In addition, DNV supports the shipowner, who requires a solution to ensure that the compliance balance achieved aligns with the total annual cost for FuelEU Maritime compliance that they have agreed to compensate the technical manager for.

For further details on the challenges and commercial implications of FuelEU Maritime, watch our on-demand webinar The commercial implications of the EU MRV, EU ETS, FuelEU regulations (July 2024).

It is important to note that DNV provides this information for general guidance. Our services are designed to support your understanding and management of FuelEU Maritime requirements. The technical manager or ISM company remains responsible for ensuring compliance with all applicable regulations. DNV’s advisory services are separate from and do not influence our regulated verification activities. Furthermore, DNV does not provide legal advice. Therefore, users should consult legal counsel and refer to official regulatory documents for definitive guidance on FuelEU Maritime compliance.