A European Union rule designed to cut greenhouse gas emissions from shipping is about to start adding to the industry’s fuel bills.
The FuelEU Maritime regulation goes into effect on January 1, and requires a 2% reduction in the greenhouse gas intensity of energy used by vessels. That’s set to add to the industry’s costs, though the precise amounts paid will depend in part on how shippers approach the new rules.
The global shipping industry spews hundreds of millions of tons of greenhouse gases into the atmosphere each year, and is under mounting pressure to decarbonize. While it already has to pay for some of its pollution under the EU’s Emissions Trading System — which is ratcheting up next year — the new rules should ultimately force the sector to emit significantly less.
One potential compliance option for shippers is to incorporate a small amount of biofuel into their overall fuel use. If they were to use what’s known as B30 — which contains at least 30% bio-component — they would end up paying about $30 a ton more overall for their marine fuel than if they were still purely relying on heavy fuel oil, according to Risto-Juhani Kariranta, a master mariner and chief executive officer at Ahti, a firm that specializes in helping shippers comply.
A potentially cheaper option would be for a ship to join a pool of other vessels, Kariranta said. In this approach, another ship within the group could use a fuel with especially low emissions, such as e-methanol, and effectively share its pollution savings with the other, dirtier ships. Using this method, the additional cost of compliance for a ship still using heavy fuel oil could be less than $20 a ton. Fuel prices are volatile, so these costs are only indicative.
If a shipper chooses to ignore the new rules and keeps using heavy fuel oil, they face a penalty of about $65 a ton, Kariranta said. For context, a ton of very low-sulfur fuel oil — a widely used ship propellant — recently cost a little more than $500 a ton in Rotterdam.
These cost estimates are all for ships sailing between ports within the EU for the next five years — the FuelEU requirements are less stringent for vessels sailing in and out of the bloc, and ratchet up from 2030.
“The FuelEU Maritime regulation will significantly impact the shipping industry, even more so than the EU Emissions Trading System,” trade group BIMCO’s Nicholas Fell said in a recent statement.
