How are carbon emissions regulations impacting the marine industry?

The EU: A Driving Force for Maritime Decarbonisation

In recent years, the European Union (EU) has taken a leading role in driving decarbonisation within the global maritime industry. The EU’s Fit for 55 package of regulations covers every sector, but it also puts forward several strategies that shipping companies can adopt to help curb their greenhouse gas emissions. 

 It’s crucial that shipping companies understand these regulations and start the process of transitioning to more energy-efficient vessels and low-carbon fuels such as HVO to avoid penalties and prepare their fleets for the future. 

 The regulations you need to know include: 

•  Revised EU MRV – Shipping companies must monitor, report, and verify their greenhouse gas emissions.
• Revised EU ETS – An extension of the EU Emissions Trading System, which now includes maritime transport and places a carbon price on emissions.
• New FuelEU Maritime Regulation – A set of targets for the use of renewable fuels in the maritime sector.
• Revised AFIR – Also known as the Alternative Fuels Infrastructure Regulation, this promotes the development of infrastructure for alternative fuels, including those used in maritime transport.
• Revised RED III – The Renewable Energy Directive sets out targets for the use of renewable energy, including maritime biofuels. 

EU Emissions Trading System (EU ETS) for Maritime

Let’s dive deeper into the EU Emissions Trading System and its impact on the marine sector. 

Since January last year (2024), passenger and cargo ships weighing 5,000 gross tonnes (GT) or more that call at ports in the European Economic Area (EEA) have been subject to these regulations. 

This means that qualifying vessels must purchase allowances to cover their reported greenhouse gas emissions. These gases include carbon dioxide (CO2), methane (CH4), and nitrous oxide (N20). 

Vessels must offset all their emissions within the EEA and 50% of those generated during voyages originating or terminating in the region. They must also surrender their EU allowances for CO2 emissions with CH4 and N20 falling under this rule from 2026. 

However, there is a phase-in period that allows shipping companies to only surrender allowances covering 70% of their verified emissions in 2025. This will go up to 100% in 2026 and surrender of allowances for each reported year will be required from 30th September of the following year. 

FuelEU Maritime

FuelEU Maritime is closely connected to the EU ETS but, as its name suggests, its more fuel focused. If the EU is to meet its ambition of net zero by 2050, low and zero carbon fuels must become the go-to, not a nice-to-have alternative – and FuelEU is one way of making that happen. 

Since 1st January 2025, shipping companies operating vessels that weigh over 5,000 GT in the EEA must meet greenhouse gas intensity reduction targets that are getting progressively stricter over time. Both container and passenger ships will also need to achieve zero at-berth emissions by 2030. 

The monitoring required to meet the FuelEU Maritime Regulation is separate from the MRV; every vessel must assess and document the method it will be using to monitor and report its energy usage. Metrics measured include the fuel amount, fuel type, and emission factor. Ships must follow the FuelEU monitoring plan to collect this data and submit it for verification before 30th March of the following year. 

One important thing to note; you can pool your ships. This means you can combine the emissions data of all the ships in your fleet, company, or group of companies. It’s hoped that this will this encourage shipping companies to invest in low-emission vessels as these new ships can reduce the greenhouse gas intensity of your fleet overall. Pooling also comes with financial perks; a pool of 10 container ships could save up to €277 million in penalties over five years if you added just one ship equipped with a more efficient propulsion system or running on a sustainable fuel like HVO. 

What are the penalties? 

It’s worth staying on top of the latest legislation as the penalties for non-compliance can be substantial. Ships that don’t hit the well-to-wake greenhouse gas intensity target will need to pay a penalty rate of €2,400 per tonne of very low sulphur fuel oil (VLSFO) equivalent. The exact penalty is calculated by multiplying the compliance balance deficit by the penalty rate and then dividing that figure by the ship’s actual greenhouse gas intensity. Penalties increase for those ships that don’t comply for two or more years consecutively. 

The International Maritime Organisation’s Response

With these incoming regulations in mind, the International Maritime Organisation (IMO) implemented a comprehensive greenhouse gas strategy in July 2023 – one that the UK has now also adopted. To reduce shipping emissions, the strategy focuses on cutting carbon dioxide over time and hitting net zero by 2050. 

For the next 25 years, that looks like: 

• Reducing total annual greenhouse gas emissions from international shipping by at least 20% by 2030 (with a stretch goal of 30%)
• Reducing total annual greenhouse gas emissions from international shipping by at least 70% by 2040 (with a stretch goal of 80%)

It’s an ambitious roadmap – and alternative fuels have an essential role to play in achieving it.

How can Prema Energy help?

If these targets and regulations are sending you into a spiral, don’t panic; Prema Energy is here to help. Not only are they on top of all the latest legislation, but they tailor their service, and their fuel, to both meet your immediate needs and satisfy your long-term goals.

With over 25 years’ experience and an in-depth understanding of the challenges facing the maritime industry, Prema can offer expert advice on how best to manage your greenhouse gas emissions and run your ships sustainably without sacrificing performance or dealing with unmanageable costs. 

And even better? Prema Energy specialises in drop-in HVO fuels that are a direct replacement for diesels currently fuelling your fleet. There’s no need to invest in expensive upgrades, install new infrastructure, or restrict the ports you visit – making the switch is seamless.