INSIGHT: FuelEU Maritime Means Shipowners Cannot Afford to Wait on Alternative Fuels
It has long been argued that alternative marine fuels, such as LNG and biofuel, are too expensive to be commercially viable, despite their clear benefits when it comes to emissions reduction.
But today the tide is turning, and for some, these cleaner fuels are actually becoming a financially astute choice.
The catalyst behind this trend is regulation – namely FuelEU Maritime, which the EU brought into force this year. While, at face value, alternative fuels have a higher price point than conventional fuels, the hefty bill that shipowners will accrue through this emissions-based penalty system may outweigh the cost savings and tip the scales in favour of alternative fuels.
Under the International Maritime Organization, industry is targeting net-zero greenhouse gas (GHG) emissions from international shipping by or around 2050.
With new environmental regulations in play, there is mounting pressure for shipowners and operators to make the switch to alternative fuels as a legal and financial imperative.
Simply put, they cannot afford to wait.
What is FuelEU Maritime?
FuelEU Maritime is a new EU regulation, which came into force on 1 January, 2025. The regulation means that vessels above 5,000 GT that transport passengers or commercial cargo and emit higher GHG emissions than stipulated face financial penalties, effectively accruing a bill on applicable journeys.
The bill corresponds to their compliance deficit, measured by taking the difference between the required and actual GHG intensity, multiplying that figure by the energy used and converting it to a regulated penalty.
Applying to both EU-flagged and non-EU-flagged vessels, so long as they undertake Port Calls within EU waters, the regulations are affecting large swathes of the international shipping industry.
For vessels travelling from one EU port to another, the penalty will apply to 100 per cent of the energy used, while vessels travelling into or out of the EU will have a penalty based on 50 per cent of the energy used with some exceptions.
The penalties are calculated at €2,400 per tonne of Very Low Sulphur Fuel Oil (VLSFO)-equivalent recorded as being over the emissions cap. The regulation marks a turning point for industry, with
some calculations indicating that revenue generated from FuelEU penalties could reach €1.345 billion in 2025 alone.
The bill is calculated on a case-by-case basis, taking into account emissions produced both from the extraction, production and transportation of the fuel, as well as emissions produced from burning the fuel as it propels the ship.
The easiest way to comply with the regulation and avoid financial penalties is by switching to alternative fuels which produce lower emissions. While they have a higher price point, it pales in comparison to the financial burden shipowners and operators could face if their fleet is non-compliant.
Ongoing Incentive to Decarbonise
2025 marks the first year that FuelEU Maritime regulations have come into force, but this is a long- term initiative designed to gradually reduce the environmental footprint of the shipping sector.
It’s important to remember the penalties are measured against the EU’s GHG reduction targets, which increase over time. It means the financial penalties facing shipowners and operators will gradually increase as the European Commission seeks continuous emissions reductions at mandated intervals until 2050.
As of now, shipowners and operators must cut their emissions by 2 per cent this year, compared with 2020 levels. In 2030 this increases to 6 per cent and in 2035 they must reach 14.5 per cent, while 2040 sees the percentage nearly double to 31 per cent, then 62 per cent in 2045, before finally reaching the goal of an 80 per cent emissions reduction in 2050.
This stepping-stone approach has been put in place to allow the industry time to formulate and deliver a plan to transition away from high-emitting fuels, in recognition that the fuel landscape simply cannot change overnight.
While shipowners and operators can gradually reduce their emissions, it must be understood that pressure will weigh heavier as time goes on and bills inflate. Faced with mounting pressure and penalties, shipowners and operators must prioritise their decarbonisation journey now, if they haven’t already, before they get in over their heads and face exorbitant fines.
Making the Switch to Alternative Fuels
Today, LNG, bio-LNG and biofuels like B30 or FAME, are among the only alternative fuels with immediate and secure availability, existing infrastructure and commercial viability.
It means transitioning to these fuels is the obvious answer for reducing emissions produced from shipping journeys and thereby complying with FuelEU Maritime.
With more environmental regulations coming into force, supply chains are also spurred on to invest in these fuels and meet customer needs on a global scale which, in an industry that is constantly navigating re-routing, is crucial.
At Peninsula, we have spent years developing our LNG bunkering capabilities. As one of the cleanest-burning marine fuels, which is readily available today, LNG allows shipowners and operators to slash their CO2 emissions by around 25% – and shipowners are taking notice.
In recent months, our dedicated 12,000-cbm LNG bunker vessel Levante LNG has supplied many different vessels in the Strait of Gibraltar and Western Mediterranean, including Royal Caribbean Group‘s cruise vessels Silver Nova and Icon of the Seas, Eastern Pacific‘s tanker Starway, MSC‘s containership Virginia and K Line‘s PCC Thor Highway.
We also recently delivered biofuel to Hapag-Lloyd AG‘s containership Yantian Express in the Port of Barcelona, while our IMO II chemical tanker Aalborg delivered 2,200 mt of B30 VLSFO, a biodiesel derived from Used Cooking Oil (UCOME).
By transitioning now, shipowners and operators will be ready to capitalise on emerging markets like bio-LNG and synthetic LNG. These fuels offer even cleaner alternatives to traditional LNG, with bio- LNG typically produced from organic waste and synthetic LNG typically produced from renewable energy sources.
With a much lower carbon footprint, they will become all the more important as regulations enforce even further emissions reductions in line with the EU’s time-bound targets.
No Time to Wait
The marine fuel landscape is changing. Even before FuelEU Maritime came into force, 2024 saw a 38 per cent uptick in alternative-fuelled newbuild vessels on order compared with the previous year, according to DNV.
As shipowners and operators map out their decarbonisation and compliance plans, it’s more important than ever that they consult with their bunker supplier, as a trusted partner that can help navigate the journey.
FuelEU Maritime is here to stay, and its penalties-based system is in place, so shipowners and operators cannot afford to wait on alternative fuels.
For more information, go to www.peninsula360.com.
