LR ETS FuelEU

EU Emission Trading System
FuelEU Maritime
Brijesh Tewari
Lloyd’s Register
COMMERCIAL IN CONFIDENCE. DO NOT DISTRIBUTE WITHOUT FURTHER CONSENT FROM LLOYD’S REGISTER
Upcoming Challenges: a fragmented regulatory landscape
Sea Cargo Charter
Applicability: 5,000 GT+
BIMCO
ETSA Clause EEOI
UK
MRV
EU
WtW TtW
FEUM ETS MRV
China
SEEMP
?
DCS CII EEDI EEXI 400 GT+
400 GT+
IMO
Clean
BIMCO Shipping
CII Clause Act 2022
AER
400 GT+
Market-based Compliance
Poseidon Principle
2
EU ETS
Headlines - what shipping can expect from EU ETS?
based on Directive EU 2023/959 and 2023/957
GHG Covered Important Date Phase-in Lowering GT Voyage scope
Extend emission scope to Requirement for shipping starts Phase-in period of: For ships below 5,000 and 50% emission for voyages
greenhouse gas covering from 01 January 2024. above 400 GT, MRV to- and from-EU ports.
CO2, N2O and CH4. Deadline for EUA surrendering
2024 40% reporting is applicable
changed from 30 April to 30 Sept. 2025 70% from 2025. If by 2028 IMO still has no
▪ MRV inclusion from 2024.
2026 100% comparable MBM, EU may
▪ ETS inclusion from 2026 Deadline for verified emission A review clause for their consider increasing the
reports submission changed Ex. 40% of emissions reported subsequent inclusion in the 50% requirement for extra-
from 30 April to 31 March. for year 2024, payable in 2025. EU ETS (by Dec 2026) EU voyages.
Polluter pays At Company Level non-EU transhipment stop Ice-class discount Offshore ships added
Member States to make sure Reporting and submission the exclusion from the Surrender 5% fewer Offshore vessels above
shipping company’s EUA cost of the aggregated concept of port of call allowances than their 5,000 GT to be included in
can be reimbursed by the emissions data is now at should only target verified emissions taking ETS from 2027.
commercial operators, who company level, as opposed containerships and ports place until 31 December
determine:
to each ship. whose main activity is the 2030 (IA or IA Super or an Offshore ships below 5,000
▪ Fuel purchase transhipment of equivalent ice class) and above 400 GT follows
▪ Cargo carried Several MRV rules have containers. lowering GT schedule
▪ Route & Speed changed to adopt it. mentioned above.
4
EU ETS Directive “Cap-and-Trade”
polluter pays for operational (Tank-to-Wake) greenhouse gas emissions
EEA
Port B
TtW CO2eq (ton) TtW CO2eq (ton)

At
non-EEA EEA EEA non-EEA
Port X Berth Port Y
Port A Port C
To EU voyages: 50% From EU voyages: 50%
Between EU / at Berth: 100%
TtW CO2eq (ton)
Applicability Scope Emission Application Phase-in Compliance
5,000 GT + Flag neutral for To-EU 50% 2024 40% Sufficient EUAs to
Based on EU MRV From- EU 50%
and ships calling 2025 70% Administering
Reg. 2015/757 Between EU 100%
(400 - 4999 GT) EEA1 ports At EU berth 100% 2026 100% Authority
1EEA = EU countries plus Iceland, Liechtenstein and Norway

2EUA = European Union Allowance -the official name for Europe's emission allowances
5
GHG Scope and Applicability – what is covered and when?
ETS for CO2 only
ETS for all GHGs
MRV for all GHGs
ETS to be reviewed
Existing MRV Ships (>5,000 GT)

2023 2024 2025 2026 2027 2028
ca. 12,000 ships
40% 70% 100% 100% 100%
Offshore Ships (>5,000 GT)

2023 2024 2025 2026 2027 2028
ca. 400 ships
100% 100%
Smaller MRV + Offshore (400 - 4,999 GT)

2023 2024 2025 2026 2027 2028
ca. 4,700 + 400 ships
100% 100%
6
ETS for CO2 only
ETS for all GHGs
MRV for all GHGs
Offshore Ships (>5,000 GT)

2023 2024 2025 2026 2027 2028
ca. 400 ships
100% 100%
Article 3c) ‘port of call’ means New definition

the port where a ship stops to Offshore activities were previously not covered by MRV as it does not serve the purpose of
load or unload cargo or to transporting cargo or passengers for commercial purposes. With the ‘voyage’ definition amended,
embark or disembark offshore service ships will be included under MRV and ETS. In the meantime, clarification is still
passengers, or the port where very much required on which offshore ship type is included / not included.
an offshore ship stops to
relieve the crew Different schedule
Offshore service ships will have some more years before ETS compliance cost being effective. By
the current wording, there will be no separate ETS phase-in period for offshore. Meaning, 100% of
GHG emissions reported for year 2027 will be payable in 2028 (via EUA surrendering).
New parameters needed for Offshore MRV

New guidance is required to determine the ‘cargo carried’, ‘voyage’, ‘time at sea’ for providing
services to an offshore structure. The MRV reporting tool embedded in the fleet management
software for commercial ships may not be suitable for offshore service ships.
7
MRV for all GHGs
ETS to be reviewed
Smaller MRV + Offshore (400 - 4,999 GT)

2023 2024 2025 2026 2027 2028
ca. 4,700 + 400 ships
100% 100%
Ship Type Cargo proximate for ships Challenges not smaller

below 5,000 GT The first operational CO2 emission target for smaller ships below 5,000 GT and above 400 GT, which
Bulk carrier < 9,999 dwt are still excluded from the IMO CO2 emission regulations (i.e. DCS, CII, SEEMP II & III). Smaller ships
General cargo < 9,999 dwt
engaging in EU short-sea shipping may face relatively higher ETS exposure than their larger
Tanker < 9,999 dwt
Container ship small feeder
counterpart.
Gas carrier small gas carrier
ETS inclusion subject to review
LNG carrier small gas carrier
Reefer < 7,999 dwt MRV reporting will be applicable for smaller ships (including offshore) from 2025. Before end of
Ro-ro < 999LM 2026, Commission shall assess whether to include them in the ETS from 2027. By the current
Source: S&P global Sea-web wording, there will be no separate ETS phase-in period.
Implication for others

Lowering the GT threshold in MRV could inspire other regulations or frameworks to do the same,
such as FuelEU Maritime, Poseidon Principles for banks and marine insurers, Sea Cargo Charter. At
this stage, only Sea Cargo Charter has considered ships below 5,000 GT (from 01.01.2022).
8
GHG calculation
Amendments due to inclusion of CH4 and N2O in MRV regulation
Calculation of GHG emissions, Section A – key takeaway:
1. The same logic as before: Fuel consumed X Emission factors
2. The new change is with accounting of non-CO2 emission. A set of formulae one for each GHG, catering for
emission from both combustion and slippage (methane)
3. The new default emission factors table is aligned with FuelEU maritime
1. Covering 4 fuel classes: fossil, bio, RFNBO & other - 26 fuel types
2. Possibility to diverge from default values under certain conditions
3. GWP is set to IPCC 5th Assessment Report [100 years] CO2 : 1, CH4 : 28, N2O : 265
4. For emission factor marked as TBM (to be measured) or N/A (not available), the highest default
value of the fuel class in the same column shall be used – for ammonia, methanol, hydrogen etc.
𝑮𝑯𝑮 𝑬𝒎𝒊𝒔𝒔𝒊𝒐𝒏𝒔𝑴𝑹𝑽 = 𝐶𝑂2 𝑀𝑅𝑉 + 𝐶𝐻4 𝑀𝑅𝑉 × 28 + 𝑁2𝑂𝑀𝑅𝑉 × 265
10
Preliminary Assessment: ETS greenhouse gas inclusion
narrowing the LNG as fuel benefit, but still better than conventional fuel
MRV Annex I FuelEU Annex II + IPCC 5th GWP100
MRV Emission Factor All GHG accounted Diff HFO

Type of Fuel Reference
[t-CO2/t-fuel] [t-CO2eq/t-fuel] CO2 vs GHG equivalent
Diesel/Gas oil ISO 8217 Grades DMX through DMB 3.206 3.255 +1.5% 3.087
Light fuel oil (LFO) ISO 8217 Grades RMA through RMD 3.151 3.200 +1.6% 3.161
Heavy fuel oil (HFO) ISO 8217 Grades RME through RMK 3.114 3.163 +1.6% 3.163
Liquefied petroleum gas (LPG) Propane 3.000 3.823 +27.4% 3.366
Butane 3.030 3.852 +27.1% 3.391
Liquefied natural gas (LNG) 3.1% methane-slip (DF medium speed) 2.750 3.561 +29.5% 2.937
1.7% methane-slip (DF slow speed) 2.750 3.208 +16.7% 2.647
0.2% methane-slip (DF slow speed) 2.750 2.830 +2.9% 2.334
2.6% methane-slip (LBSI) 2.750 3.435 +24.9% 2.834
No methane-slip (abatement) 2.750 2.779 +1.1% 2.293
Methanol 1.375 1.424 +3.6% 2.898
Ammonia 0.000 0.048 0.104
Source: FuelEU Maritime Annex II: Table 1 Default factors, TtW & IPCC Fifth Assessment Report GWP100 and EC Concept notes
This is a preliminary assessment aligned with the methods currently available.

By 1 October 2023, there shall be more clarity with further published delegated acts (i.e. guidance)
11
Overview of implementing / delegated acted to be developed
Reg. Description Via Deadline
MRV Rules and methods for monitoring and reporting GHG emissions and other relevant information Delegated act by 01 Oct 2023
Rules on verification and accreditation in relation to maritime transport emissions Delegated act
Rules on the reporting of aggregated emissions data at company level Delegated act
Templates for monitoring plans, emissions reports, reports at company level Implementing act
ETS Rules for the administration of shipping companies by administering authorities Implementing act
List of shipping companies which performed maritime activity under the EU ETS, with their attribution to the
Implementing act before 01 Feb 2024
adminsitering authority responsible
List of non-EU neighbouring container transhipments ports Implementing act by 31 Dec 2023
List of islands and of transnational maritime routes under public service contract or obligation subject to
Implementing act
derogations under the EU ETS
12
Emission
allowances
EUA - what is the definition of emission allowances?
Obtaining EUA
▪ Primary market: auctions of EUAs by member States
through the European Energy Exchange (EEX)
▪ Secondary market: trading EUAs facilitated by the EEX
▪ EUAs made available in the primary market (auctions
generally expected to be through the EEX) will decline by
4.3% (2024-27) and 4.4% (from 2028) per annum
European Union Allowance (EUA)
Holding EUA
▪ Union Registry (an online database): the registry keeps
‘allowance’ means an allowance to emit
track of the ownership of allowances held in electronic
one tonne of CO2 equivalent during a
accounts, just as a bank has a record of all its customers
specified period, which shall be valid only
and their money
for the purposes of meeting the
requirements of this Directive and shall be ▪ Account: To participate in the EU ETS, companies have
transferable in accordance with the to open an account in the Union Registry. To open an
provisions of this Directive. account, they must send a request to the national
Source: DIRECTIVE 2003/87/EC Article 3a)
administrator, who collects and checks all supporting
documentation
14
Allowance surrender date postponed offering opportunities
EUA Emission Allowance Auction Price €/tCO2
2021 2022 2023

120 highest
100
80
60
lowest BAU 6-month EUA trade
40 window
20
0
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23
By March 31 By Sept 30
MRV Reporting Period Company level verified emission report deadline for Using past
submitted to administering authorities/EC allowances
surrendering auction price to
Optimisation Potential demonstrate the
optimisation
potential as well
From first MRV voyage to reporting deadline: 15 months apart as challenges
having a laissez-
faire attitude
From first MRV voyage to EUA surrendering deadline: 21 months apart toward EUA
15
Practicalities
Administering Authorities – which EU country is responsible?
Start The published Administering Authority

By Feb 2024:
responsible for a company retains
responsibility regardless of subsequent - A first list of shipping
changes until those changes are companies specifying
reflected in an updated list
their Administering
Company has Authorities
Company
EU port of calls
registered in By Feb every 2 years after:
no in the past 4 no
EU?
years? - An updated list of
a) Companies changes
registration within EU
yes yes c) Companies start
callings EU ports
Member State in which Member State with the Member State from where
greatest estimated number By Feb every 4 years after:
Company is registered a ship of company has
of port calls from voyages arrived or started its first - An updated list of
performed by Company voyage from EU ports. b) type Companies
in the last 4 monitoring
a years b c (via implementing acts)
17
Polluter pays – legal measure remains unclear at this stage
“Member States shall take

the necessary measures to
ensure that
when the ultimate

responsibility for the
EU Member States Shipping Company Commercial Operator
purchase of the fuel and/or
the operation of the ship is Member States to make Entity that has assumed Entity that is responsible
assumed by a different sure that shipping the responsibility for the for fuel purchase and/or
entity than the shipping company’s EUA cost can operation of the ship determining the cargo
be reimbursed by the from the ship owner, as carried and/or the route
company pursuant to a
commercial operators ISM DOC holder and the speed of the ship
contractual arrangement,
the shipping company is

entitled to reimbursement
from that entity for the
MRV EUA Penalties Naming Denial EU
costs arising from the Reporting Surrender 100 € /EUA Shaming Entry
surrender of allowances“
Actions required Non-compliance consequences
18
Definition of a ‘Port of call’
A ‘port of call’ means Excluded from being a “port of call”

A ‘port of call’ means Excluded from being considered a port of call
▪ the port where a ship stops to load or unload cargo • Stops for the sole purposes of refuelling, obtaining supplies,
relieving the crew of a ship other than an offshore ship, going
into dry-dock or making repairs to the ship and/or its
▪ the port where a ship stops to embark or disembark equipment
passengers
• Stops in port because the ship needs assistance or in distress
▪ the port where an offshore ship stops to relieve the
crew • Ship-to-ship transfers carried out outside ports
• Stops for the sole purpose of taking shelter from adverse

weather or rendered necessary by search and rescue activities,
Offshore Stops of containerships in a listed neighbouring container

Cargo Pax Crew
•
transhipment port.
19
New definitions help mitigate risk of evasive port calls
50%
BEFORE non-EEA non-EEA EEA

Neighbouring Existing Port X Trans Port A
Container port call port call port call
Transshipment
Adding an extra stop of a non-EEA transhipment port before a EEA port within
Ports EU itineraries could significantly reduce EU ETS exposure. Emissions will be
accounted for the last-mile voyage only, i.e. between the non-EEA transhipment
port and the EEA port A.
• in a non-EU neighbouring country
• at a distance of less than 300 nms of an EU port 50%
• Port’s share of container transshipment exceeds AFTER non-EEA non-EEA EEA

Port X Trans Port A
65% of that port’s total container traffic Amended
(measured in TEU) in most recent 12 months. port call port call
With Article amended, stops in a non-EEA transhipment port can no longer be

considered as a port of call under EU ETS, the voyage can be seen as if there is
applicable to container ships only no stop in between. Thus, emissions shall be accounted for the longer voyage,
i.e. between the non-EEA port X and the EEA port A.
By 31 Dec 2023 a transhipment ports list is to be established.

The list will be updated before 31 Dec every two years thereafter
20
Certain EU ETS exemptions available until Dec 2030
Small Island Exemption Outermost Region

EU island with no road or rail link with Voyages between a port located in an
the mainland with less than 200 000 outermost region and a port located in
permanent residents : the same Member State etc.
Until Dec 2030
pax ship (non-cruise pax) or ropax Until Dec 2030
all ship types
Transnational Public Service Ice-Class Correction

On voyages performed in the surrender 5 % fewer allowances than
framework of a transnational public their verified emissions from
service contract or a transnational
public service obligation IA or IA Super or an equivalent ice class
Until Dec 2030 Until Dec 2030

pax ship (non-cruise pax) or ropax all ice-classed ships
21
Upcoming MRV rule changes with ETS
BEFORE AFTER
Reporting
principle At ship level At company level
Jan.01 Jan.01
▼ ▼
For voyages YYYY YYYY +1 YYYY YYYY+1
starting and YYYY YYYY YYYY+1
ending in 2
accounted under the first calendar the respective data shall be accounted
calendar years year concerned under the calendar year concerned
Company change Company change

▼ ▼
Where there is Company A Company B Company A Company B

Company B Company A Company B
a change of
company New company responsible for the Old company is responsible for
entire reporting period submitting verified ER no later than 3
months after the change event.
22
EUA economic to be embedded into daily commercial operation
Moving an empty vessel from Gibraltar anchorage to

the next loading port (ballast voyage)could cost extra
if the ship had an EEA port of call before.
Ballast voyages, from the last port of call Practical challenges:

where the ships has discharged cargo or
disembarked passengers to the next port 1. Who should pay for the additional cost under different charterparties?
of call where cargo is loaded or 2. Can emission verification take place on a voyage-by-voyage basis?
passengers embark, also serve the 3. Is there any potential for carrying out tactic ballast legs (e.g. an extra stop
purpose of transporting cargo and are
therefore subject to the Regulation. loading/unloading cargo around EU) to minimize ETS exposure?
(MRV FAQ by DG CLIMA) 4. How to estimate EUA for an upcoming voyage even before fixture?
23
Case Study - EU ETS Example : LNG Carrier
EEA
Port B
3,865 CO2-ton 1,814 CO2-ton

At
non-EEA EEA EEA non-EEA
Port X Berth Port Y
Port A Port C
To EU voyages: 50% From EU voyages: 50%
Between EU / at Berth: 100% Assumptions

1. To simplify this example, assuming the vessel emits the same amount of CO2 emission year-on-year until 2030.
0 / 75 CO2-ton 2. Emission allowance assumption: 94€ per CO2-ton

3. Based on the EC proposal (conservative estimate)
2,915 EUAs needed

EUA 94€: 274k EUR p.a.
From 2026 based on current development
24
Impacts and Challenges under EU ETS
Polluter pays EUA Pricing Hedging GHG Scope Extended

Who is payer under different charter Emission allowance price fluctuates Greenhouse gas inclusion will mean
parties: based on the market demand- increased emission factor for each
• Voyage charter supply balance. fuel.
• Time charter
EUA pricing volatility should be Methane-slip accounting will be
• Single trip time charter
taken into consideration as part of narrowing the LNG as fuel benefit.
• Bareboat charter
the ETS compliance strategy
There are commercial and legal
challenges under charterparties.
EUA Balance
polluter-pays concept may
+ 2,145,812 EUA sound simple, there are however
[Year 2025] practical challenges. Be mindful
about the commercial impacts
25
Some finer points !
1. Companies can open Trading accounts now and buy EUAs. The EUAs are valid until 2030.
2. Formulate the compliance / trading strategy.
3. Estimate cash flow and apply risk management as per risk appetite
4. Understand the EUA price dynamics and parameters
5. Track the market
6. Speculation may not turn out to be useful
7. Estimate the administrative burden of environmental compliance
8. Calculate the EUA price level for which a technological change compensates for the cost of
environmental compliance
26
Fuel EU Maritime
FuelEU Maritime - GHG Intensity / Compliance Balance / Fuel Penalty
GHG intensity [gCO2eq]=fwind×(WtT+TtW)

MJ
𝑎𝑏𝑠 (𝐺𝐻𝐺𝐼𝐸𝑡𝑎𝑟𝑔𝑒𝑡 −𝐺𝐻𝐺𝐼𝐸𝑎𝑐𝑡𝑢𝑎𝑙 ) 𝑀×𝐿𝐶𝑉+𝐸

𝑹𝒆𝒎𝒆𝒅𝒊𝒂𝒍 𝑷𝒆𝒏𝒂𝒍𝒕𝒚 𝑬𝑼𝑹 = × × 𝐸𝑈𝑅 2400
𝐺𝐻𝐺𝐼𝐸𝑎𝑐𝑡𝑢𝑎𝑙 41 000
1 2 3
Extent of underperformance Annual total amount of energy Penalty to be paid in EUR per
against the target for the year (MJ) delivered to the ship non-compliant fuel ton
as percentage of GHGIE actual [%] as per metric ton of VLSFO eq. [MT] as EUR per VLSFO eq. [€/MT]
GHGIE actual
× Fuel Electricity
× 𝐸𝑈𝑅 2400
GHGIE target +
WtW GHG intensity
[gCO2eq/MJ]
VLSFO conversion
1 2 3
28
The Lifecycle of Zero- and Low-Carbon Fuels
Well-to-Wake refers to all stages in the lifecycle of marine fuels – both well-to-tank and tank-to-wake
Well-to-Wake
Primary
Energy
Production
Transport &
Production Conversion Storage Bunkering Propulsion
Distribution
Cultivation
Harvest
Collection
Well-to-Tank Tank-to-Wake
Well-to-Tank includes, but is not limited to, operations leading Tank-to-Wake includes, but is not limited to, the application of
to the production of the fuel, including production, conversion the fuel on board of the ship (through e.g., combustion in vessel
processes, transport & distribution, storage and bunkering. engines or fuel cell propulsion)
Source: Sustainable Shipping Initiative, Defining sustainability criteria for marine fuels report (September 2021). 29
FuelEU Maritime brings new pressures and new plays to shipping
yearly GHG intensity

1.
Fuel EU Maritime takes a goal-based
and fuel-technology-neutral
approach
2.
There will be a financial penalty for
under-performance relevant to each
quantum of non-compliant energy
3.
Over-performance will be rewarded
– compliance surplus can be banked
or pooled
2025-2029 2030-2034 2035-2039 2040-2044 2045-2049 2050-2054
[Penalties per tonne VLSFO-eq]

30
Compliance Technologies
Rig-Sail System Solar-Sail System
Benefit under FuelEU – Benefit under FuelEU –
Wind Reward Factor Wind Reward Factor + Renewable and Onboard Carbon Capture and Storage
Kite-Sail System Low-Carbon Fuels
Energy supplied by
Use of OCCS not yet recognized as an option for
Benefit under FuelEU – renewable/alternative
Use of renewable and FuelEU compliance – included in the Revision for
Wind Reward Factor source of power.
low carbon fuels – future assessment and consideration – technology
direct reduction of GHG needs to be demonstrated
intensity of the energy
used.
Onshore Power Supply

Connection to OPS will benefit of GHG intensity
= ‘0’ gCO2e/MJ – zero WtT emission factor for
OPS electricity
H2 - FC Auxiliary Power Units – Low-Carbon

No Ballast Ship fuel/ Hydrogen Fuel Cells
Improvement of Energy Efficiency – Modular Power Units, based on low-carbon

Not a measure to improve GHG fuels/ hydrogen/ fuel cells
intensity of the Energy Used Possibility for Zero-Emissions at Berth
Bulbous Bow
Improvement of Advanced Rudder & Propeller
Energy Efficiency –
Not a measure to Improvement of Energy Efficiency –
improve GHG Not a measure to improve GHG
intensity of the intensity of the Energy Used
Energy Used
Air Bubbles – Hull

Improved Hull Paints Lubrication Advanced Multi-fuel
engines/ Fuel Cells Speed Nozzle Relevant for FuelEU
Improvement of Energy Efficiency – Not a measure Improvement of Energy
to improve GHG intensity of the Energy Used Efficiency – Not a Multi-Fuel Engines or Fuel Improvement of Energy Efficiency – Possible in future revision for FuelEU
measure to improve GHG Cells, with technologies for Not a measure to improve GHG
intensity of the Energy methane slip mitigation. intensity of the Energy Used Energy Efficiency – Not relevant for FuelEU (even though,
Used total energy consumption does affect compliance balance
calculation – important for calculation of compliance
Source - Arcsilea “deficit” or “surplus”
Headlines – what shipping can expect from FuelEU Maritime?
based on Parliament & Council of EU agreed text 26.04.2023
Important Date GHG reduction rate RFNBO mandate Pooling prerequisites Non-compliance multiplier
From 01 January 2025, FuelEU Reference value: If by 2031 RFNBO usage is still A pool is only valid when: A FuelEU penalty multiplier of:
requirements start. less than 1%, from 2034, 2% of
91.16 gCO2 eq/MJ 1. total pooled compliance is 1 + (n -1)/10
yearly average energy used on-
By 31 August 2024, deadline for positive.
Year Reduce by [gCO2 eq/MJ] board shall be met with RFNBO, will be applicable for ships
submitting FuelEU monitoring 2. A ship with deficit cannot
2025 -2% 89.34 otherwise penalties apply. having deficits for 2 or more
plan. end up with higher deficits.
2030 -6% 85.69 years in a row.
3. A ship with surplus cannot
By 31 January each subsequent 2035 -14.5% 77.94 Multiplier of “2” for RFNBO
end up with deficits.
year, deadline for submitting a 2040 -31% 62.90 energy use until 31 December n: number of consecutive years
ship-specific FuelEU report. 2045 -62% 34.64 2033 as reward factor. Pooling is possible from the paying FuelEU penalty.
2050 -80% 18.23 same or different companies.
Charterers pay Fuel suppliers pay Wind assisted reward Non-EU transhipment stop Keeping 5000 GT threshold
Via contractual agreements to Via contractual agreements to With wind assisted ship the exclusion from the concept FuelEU applies to ships above
reimburse the company for the reimburse the company for the propulsion installed onboard, a of port of call targets only 5000 GT.
payment of FuelEU penalties payment of FuelEU penalties reward factor can be applied. containerships and ports whose
from commercial operator who from fuel suppliers: The ship GHG intensity index is main activity is the EC will regularly reassess if they
purchases the fuel or determine: then calculated by multiplying: transshipment of containers. should extend the scope to ships
… in cases where fuels were not below 5000 GT.
• cargo carried ▪ 0.99 for Pwind/Pprop: 5% ▪ Non-EU country
made available to the company
• route ▪ 0.97 for Pwind/Pprop: 10% ▪ < 300 nm of an EU port
as agreed. Regularly means by end of 2027
• speed ▪ 0.95 for Pwind/Pprop: >15% ▪ Port container transshipment
& every five years afterward.
exceeds 65% of port’s total
32
FuelEU Maritime
NEW
GHG
GHG Intensity On-shore Power Supply RFNBO Quota

Limiting the yearly average Obligation to connect to on- 2% of yearly average energy
greenhouse gas intensity of the shore power supply for ships used on-board shall be met
energy used onboard by a ship and use it for all energy needs with renewable fuels of non-
during a reporting period while at berth in a port biological origin (RFNBO)
From 2025 From 2030 (major EU ports) From 2034

all ship types From 2035 (rest of EU) (if by 2031 RFNBO usage < 1%)
container / passenger ship all ships types
33
FuelEU Maritime
*rough estimate for demonstration purpose only
FuelEU Maritime GHG Intensity and Reduction Factor Category GHG Intensity*
based on provisional agreement final text 26.4.2023 Fossil fuel 80 ~ 110 gCO2eq/MJ
Bio-fuel 30 ~ 50 gCO2eq/MJ
120% RFNBO (e-fuel) < 20 gCO2eq/MJ
-2% -6% -14.5% -31% -62% -80%

GHG Reduction % relative to 2020
100%
100%
98%
It starts here:
94%
80%
85.5%
the reference line
corresponds to
the fleet average
69%
60% GHG intensity of
the energy used
on-board ship
40% determined by
EU MRV 2020.
38%
20%
20%
0%
2020 2025 2030 2035 2040 2045 2050
GHG Intensity: 91 89 86 78 63 35 18 [grams CO2eq per MJ]
the calculated MRV 2020 fleet 2% RFNBO Mandate

average GHG intensity is 91.16 in 2031
overall TRUE From 2034 Jan 01, 2% of yearly average energy used on-board shall be
grams CO2eq per MJ, by applying RFNBO usage met with renewable fuels of non-biological origin (RFNBO)
< 1%
the reduction factor, the yearly
limits can be calculated.
34
ETS and FuelEU : Cumulative Impact on Ships Calling Europe
ETS promotes energy savings, whereas FuelEU addresses fuel technology
EU ETS and FuelEU Maritime cost comparison Illustrative example of how green fuel is viewed under FuelEU
€3
Millions
By 2050 10 yrs-old Kamsamax Bulk carrier

€ 2.53 150 Methanol (made from natural gas)
€3 - FuelEU: € 2.5m
FuelEU 104.2
- ETS: € 359k
WtW GHG intensity [gCO2eq/MJ]

100 [gCO2eq/MJ]
€2 € 1.97 50
Between 2035 ~ 2040
7x
FuelE overtakes ETS 0
2020 2025 2030 2035 2040 2045 2050
€2
150
€ 1.00 100
e-Methanol (renewable + recycled carbon)
€1
50
€ 0.49 7.09
€1 € 0.36 € 0.36
0 [gCO2eq/MJ]
EU ETS 2020 2025 2030 2035 2040 2045 2050
€ 0.10 € 0.22
€0 compliant surplus
2020 2025 2030 2035 2040 2045 2050
Impact summary EU ETS compliance cost will start higher, How it works FuelEU sets limit for the yearly average greenhouse
whereas FuelEU Maritime penalties (based on LFO) will gas intensity of the energy used onboard by a ship during a
gradually catch up and overtake between 2035 and 2040. reporting period. Penalty calculated based on the extent of under-
or over-performance against the target for the year.
35
Pooling Illustrative Example : 2030~2034
paying 227 mil.€ less penalty, an e-methanol ship can save up to 10 VLSFO ships in a pool
Assumptions
1. To calculate the GHGIE intensity limit, 2020 reference value is set to 89.18 [gCO2eq/MJ].
2. VLSFO's well-to-wake carbon intensity is set to 91.40 [gCO2eq/MJ].
3. e-methanol's well-to-wake carbon intensity is set to 7.09 [gCO2eq/MJ].
4. In-scope fuel consumption is calculated proportionally to the in-scope CO2 emission.
5. All ships are technical sister, container ships and have identical trades, therefore the same CO2 emission throughout the years.
6. Ignoring pilot fuel, energy loss during combustion, trade pattern changes due to containment system restriction etc.
VLSFO 19k TEU Boxship Fleet x10 e-methanol Transition x10 + x1

wait & see scenario green fuel scenario
2030 : 3.8 mil.€ x 10 x 1.1 = 38 mil.€ 2030 : 3.8

onemil.€ x 10 xon1.1
ship running e- = 38 mil.€
0€
2031 : 3.8 mil.€ x 10 x 1.1 = 42 mil.€ methanol will create
2031 : 3.8 mil.€ x 10 x 1.1 = 42 mil.€
enough surpluses to
2032 : 3.8 mil.€ x 10 x 1.2 = 45 mil.€ 2032 : 3.8 mil.€ x 10 x 1.2 = 45 mil.€
balance out deficits of
2033 : 3.8 mil.€ x 10 x 1.3 = 49 mil.€ 2033 : 3.8
ten mil.€
VLSFO xships
10 in
x the
1.3 = 49 mil.€
2034 : 3.8 mil.€ x 10 x 1.4 = 52 mil.€ 2034 : 3.8
samemil.€
poolxevery
10 xyear
1.4 = 52 mil.€
VLSFO / 91.4
Article 20 Penalty Multiplier: 83.83 / GHGIE target
deficit surplus
1 + (n -1)/10
where n is the number of
consecutive reporting periods for
which the company is subject to a
remedial penalty for this ship. 7.09 / e-methanol
36
Impacts and Challenges under FuelEU Maritime
Pay to comply, and? To Pool or not to Pool? RFNBO quota?

By design, using fossil fuels going Pooling is a flexible compliance A Parliament’s proposal to set a
forward will be punished with hefty mechanism which offers many target of 2% of yearly average
fines. Pay-to-comply could still be a opportunities in the long run. energy used on-board, which shall
viable strategy at the beginning be met with renewable fuels of non-
until it becomes too costly from Pooling among multiple companies biological origin (RFNBO).
2035. may be attractive in some
circumstances but be mindful about Penalties and flexible mechanisms
the commercial complexities. (pooling, banking etc.) also apply.
Pooling Outcomes
Pay-to-comply will not be a
+ 3,512,009 CO eq 2
viable strategy in the long run
[Year 2035] especially for those who wish to
be ahead of the game
37
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officers, employees or agents are individually and collectively, referred to in this
clause as ‘Lloyd’s Register’. Lloyd’s Register assumes no responsibility and shall not
be liable to any person for any loss, damage or expense caused by reliance on the
information or advice in this document or howsoever provided, unless that person has
signed a contract with the relevant Lloyd’s Register entity for the provision of this
Thank you information or advice and in that case any responsibility or liability is exclusively on
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EU Emission Trading System

FEUM ETS MRV

GHG Covered Important Date Phase-in Lowering GT Voyage scope

TtW CO2eq (ton) TtW CO2eq (ton)

Between EU / at Berth: 100%

TtW CO2eq (ton)

Applicability Scope Emission Application Phase-in Compliance

1EEA = EU countries plus Iceland, Liechtenstein and Norway

MRV for all GHGs

Existing MRV Ships (>5,000 GT)

Offshore Ships (>5,000 GT)

Smaller MRV + Offshore (400 - 4,999 GT)

MRV for all GHGs

Offshore Ships (>5,000 GT)

Article 3c) ‘port of call’ means New definition

New parameters needed for Offshore MRV

Smaller MRV + Offshore (400 - 4,999 GT)

Ship Type Cargo proximate for ships Challenges not smaller

Implication for others

𝑮𝑯𝑮 𝑬𝒎𝒊𝒔𝒔𝒊𝒐𝒏𝒔𝑴𝑹𝑽 = 𝐶𝑂2 𝑀𝑅𝑉 + 𝐶𝐻4 𝑀𝑅𝑉 × 28 + 𝑁2𝑂𝑀𝑅𝑉 × 265

MRV Emission Factor All GHG accounted Diff HFO

This is a preliminary assessment aligned with the methods currently available.

EUA Emission Allowance Auction Price €/tCO2

2021 2022 2023

Start The published Administering Authority

“Member States shall take

when the ultimate

the shipping company is

A ‘port of call’ means Excluded from being a “port of call”

• Stops for the sole purpose of taking shelter from adverse

Offshore Stops of containerships in a listed neighbouring container

BEFORE non-EEA non-EEA EEA

Container port call port call port call

• Port’s share of container transshipment exceeds AFTER non-EEA non-EEA EEA

With Article amended, stops in a non-EEA transhipment port can no longer be

By 31 Dec 2023 a transhipment ports list is to be established.

Small Island Exemption Outermost Region

Transnational Public Service Ice-Class Correction

Until Dec 2030 Until Dec 2030

Company change Company change

Where there is Company A Company B Company A Company B

Moving an empty vessel from Gibraltar anchorage to

Ballast voyages, from the last port of call Practical challenges:

3,865 CO2-ton 1,814 CO2-ton

Between EU / at Berth: 100% Assumptions

0 / 75 CO2-ton 2. Emission allowance assumption: 94€ per CO2-ton

2,915 EUAs needed

Polluter pays EUA Pricing Hedging GHG Scope Extended

GHG intensity [gCO2eq]=fwind×(WtT+TtW)

𝑎𝑏𝑠 (𝐺𝐻𝐺𝐼𝐸𝑡𝑎𝑟𝑔𝑒𝑡 −𝐺𝐻𝐺𝐼𝐸𝑎𝑐𝑡𝑢𝑎𝑙 ) 𝑀×𝐿𝐶𝑉+𝐸

yearly GHG intensity

2025-2029 2030-2034 2035-2039 2040-2044 2045-2049 2050-2054

[Penalties per tonne VLSFO-eq]

Onshore Power Supply

H2 - FC Auxiliary Power Units – Low-Carbon

Improvement of Energy Efficiency – Modular Power Units, based on low-carbon

Air Bubbles – Hull

GHG Intensity On-shore Power Supply RFNBO Quota

From 2025 From 2030 (major EU ports) From 2034