EU brings in green fuel law for shipping

After an extensive two-year negotiation process, the European Union (EU) has reached an agreement on the definitive regulations for climate-neutral shipping through the adoption of the FuelEU Maritime initiative.

This political agreement entails the inclusion of shipping in the EU’s emissions trading system (ETS) starting in 2024, followed by the implementation of FuelEU Maritime in 2025. Under these frameworks, shipping companies will progressively reduce the environmental impact of the fuels used. Furthermore, guidelines will be established for alternative fuel infrastructure, including the mandatory utilization of shore power in select major ports.

Raquel Sánchez Jiménez, the Spanish Minister of Transport, Mobility, and Urban Agenda, emphasized that this new legislation will offer legal certainty to ship operators and fuel producers. It will also stimulate the large-scale production of sustainable maritime fuels, thereby significantly contributing to both European and global climate targets.

At the core of this initiative, which is part of the EU’s Fit for 55 packages, is the objective of fostering greater demand for renewable and low-carbon fuels while reducing greenhouse gas emissions within the shipping sector.

The newly enacted regulations aim to align maritime transport with the EU’s climate targets for 2030 and 2050, playing a crucial role in fulfilling the European climate law.

To ensure a gradual decrease in the greenhouse gas intensity of fuels used in the shipping sector, the new legislation includes measures that will result in a reduction of 2% by 2025, escalating to as much as 80% by 2050.
A special incentive scheme will provide support for the adoption of renewable fuels derived from non-biological sources, which possess significant decarbonization potential. Meanwhile, fossil fuels will be excluded from the certification process outlined in the regulation.

Starting in 2030, passenger ships and containers will be required to utilize onshore power supplies for all their electricity needs while docked in major EU ports.

The regulation also introduces a voluntary pooling mechanism, allowing ships to combine their compliance balance with one or more vessels. However, the collective pool must adhere to the greenhouse gas intensity limits on average.

Additionally, the revenue generated from the enforcement of the regulation, known as “FuelEU penalties,” will be allocated to projects that support the decarbonization of the shipping industry. An enhanced transparency mechanism will be implemented to ensure accountability in this regard.

Following the summer, the new regulation will be published in the EU’s official journal and will come into effect on the twentieth day after its publication.

Jacob Clasen, the deputy director general and deputy CEO of Danish Shipping, expressed his views on these ambitious climate regulations. He highlighted that they provide shipping companies, investors, and fuel producers with a clear roadmap to navigate the green transition. Clasen also acknowledged the current political momentum in favour of environmentally friendly shipping, citing the recent global climate agreement for shipping reached by member states of the United Nations’ International Maritime Organization (IMO). He attributed this achievement to the EU’s dedicated efforts and ambitious climate package, which has now been finalized. Clasen emphasized that these regulations will stimulate investments in eco-friendly vessels and expedite the production of sustainable fuels for maritime use.