The two regulations at a glance
EU ETS (Emissions Trading System) extended to maritime from 1 January 2024 requires surrender of emission allowances for CO₂ emitted on voyages involving EU ports. FuelEU Maritime, from 1 January 2025, imposes a declining carbon intensity limit on energy used on these voyages, forcing fuel mix toward lower-carbon alternatives. Both apply to ships over 5,000 GT.
EU ETS — how it works
Shipping companies must surrender EU Allowances (EUAs) equal to their verified emissions. Emissions on intra-EU voyages are 100% covered; emissions on voyages between EU and non-EU ports are 50% covered. Phase-in is three years: 40% of emissions in 2024, 70% in 2025, 100% from 2026. EUAs are purchased from the EU ETS market; at current prices of roughly €70-90 per tonne CO₂, the cost per tonne of bunker consumed is approximately €200-280 depending on fuel carbon factor.
FuelEU Maritime — how it works
FuelEU sets a declining GHG intensity limit for energy used onboard: -2% versus 2020 baseline from 2025, tightening to -80% by 2050. It applies the same voyage scope as EU ETS. Non-compliance triggers a penalty. Compliance can be achieved through biofuel blending, alternative fuels, pooling with compliant vessels, or banking/borrowing across years.
How they interact
EU ETS prices the CO₂; FuelEU forces fuel mix change. A vessel can comply with EU ETS by buying allowances and keep burning conventional fuel, but FuelEU forces the fuel mix to shift — burning progressively more biofuel, LNG, or other lower-carbon options. The combined cost of compliance scales fuel choice toward lower-carbon grades.
Commercial pass-through
Whether the owner, charterer, or cargo interests ultimately bear these costs depends on charter and affreightment terms. Standard time charter clauses typically pass ETS costs to the charterer; new clauses (BIMCO's ETSS-21 and ETS clauses for FuelEU) formalise the allocation. Cost pass-through to cargo interests depends on freight contract terms.
Implications for bunker buying
The effective cost of carbon-intensive fuel on EU voyages includes EU ETS allowance cost. For a VLSFO tonne (3.11 tCO₂ per tonne) on 100% intra-EU voyage at €80/tCO₂, the effective added cost is roughly €250 per tonne. This changes the economics of biofuel blends, LNG, and other alternatives — what looks expensive as a fuel can be competitive once regulatory costs are netted. FuelEU then tightens the mix beyond what ETS alone would drive.
Practical steps
Work with your supplier to understand fuel carbon factor and EUA equivalent cost. Plan ahead for FuelEU compliance — biofuel or alternative fuel strategy over multi-year horizon. Ensure MRV (monitoring, reporting, verification) documentation is robust. Engage with charterers on cost allocation early.
Frequently Asked Questions
Do EU ETS and FuelEU apply to vessels registered outside the EU?
Yes. Both regulations apply based on port calls, not flag. Any vessel over 5,000 GT calling an EU port is in scope.
Does biofuel reduce my EU ETS exposure?
Certified sustainable biofuel is treated as zero emission under EU ETS (no allowance surrender required for the biofuel portion). This can offset the premium per tonne of biofuel versus conventional fuel materially.
How do I document biofuel for ETS and FuelEU credit?
Via certified sustainability documentation — typically ISCC-EU certification or RED II compliance. The certification chain from feedstock through final delivery must be intact. BDN should reference the certification.
What happens if I exceed the FuelEU GHG intensity limit?
Penalty payment per tonne of non-compliant energy. The penalty level is designed to make compliance through cleaner fuels cheaper than paying. Pooling and banking provide flexibility but not unlimited scope to avoid compliance.
Can I pass EU ETS costs to the charterer?
Depends on charter terms. BIMCO has standard clauses (ETS-21 and newer) that address cost allocation. Older time charters without such clauses may leave the cost with the owner unless amendment is agreed. Negotiate this explicitly in new fixtures.