- Key differences in emissions measurement (tank-to-wake vs. well-to-wake) and responsibility for penalties.
- Different entities bear compliance and penalty costs, creating new legal risks.
- FuelEU introduces compliance-based revenue, with penalty and surplus structures.
In the ETS framework, greenhouse gas (GHG) emissions are evaluated on a tank-to-wake basis, focusing on direct fuel combustion. FuelEU Maritime, however, uses a well-to-wake approach, which includes production emissions. This makes some fuels, like LNG, more favorable under FuelEU due to their less carbon-intensive production process, reports Seatrade Maritime.
Responsibility for Emissions Compliance Costs
Under the ETS, vessel owners, managers, or bareboat charterers are responsible for penalties related to emissions. In contrast, FuelEU places this burden on the Document of Compliance (DOC) holder under the ISM Code.
This discrepancy creates new compliance issues, as DOC holders often do not control fuel choices or direct ship operations, leading to challenges in risk management and potential financial exposure.
Potential for Revenue Generation in FuelEU
Unlike ETS, where penalties are fixed based on emission levels, FuelEU can generate new revenue streams through compliance thresholds.
Starting April 2026, emissions will be compared against thresholds, with penalties for excess emissions and potential credits for surpluses. These thresholds will be tightened every five years, incentivizing the use of sustainable fuels that produce lower emissions.
Compliance Surpluses and Deficits
Each tonne of VLSFOe (Very Low Sulfur Fuel Oil equivalent) over the set threshold incurs a EUR 2,400 penalty, while surpluses offer flexibility for companies to borrow, bank, or pool credits, effectively turning emissions control into a revenue opportunity.
Sustainable biofuels, such as biodiesel from animal fat and waste cooking oil, currently yield the highest surplus, though renewable fuels of non-biological origin (RFNBOs) are expected to gain popularity as emissions standards tighten.
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Source: Seatrade Maritime
