EUROPE's FuelEU rule that came into force this month is 'a major market intervention' by the European Union that will determine the long-term profitability of vessels in EU waters, reports new York's Journal of Commerce.
According to Lloyd's Register, the rule requires shipping companies to increase use of eco fuels. While compliance with the EU Emissions Trading Scheme (ETS) represents an immediate cost, non-complying shipowners burning fossil fuel will face suffer even greater costs.
'Today, many owners and managers are concerned with the EU Emissions Trading Scheme designed to reduce emissions produced by shipping,' Ryan Bax, lead business advisory consultant at Lloyd's Register (LR), noted in a recent report from the classification society.
'However, LR projections show that the impact of FuelEU will eclipse that of the ETS around 2035 and dwarf it beyond that,' said Mr Bax. 'Business as usual is therefore no longer an option and progressive decisions must be made to deal with this challenge.'
FuelEU requires shipping companies to increase their uptake of renewable and low-carbon fuels by setting limits on the yearly average greenhouse gas (GHG) intensity of the energy used by vessels calling at European ports. The limits start this year with a two per cent reduction and require an 80 per cent reduction by 2050.
The ETS tax of 40 per cent on carbon emissions in 2024 increases to 70 per cent this year. To recover and pass on those costs to cargo owners, carriers have announced plans to simplify the process by merging compliance with the ETS and FuelEU regulations into one fuel surcharge.
Mr Bax warned that carriers adopting a 'wait-and-see' approach would find themselves subject to penalties and the need to buy surplus fuels to comply with the rule, as well as facing reduced income from customers wanting to reduce their indirect 'scope 3' value chain emissions.
The LR report estimated that for a fleet of five ships running the same marine fossil fuel mix as today, and each using 5,000 tonnes of fuel per year between 2030 and 2034, the shipowner would pay penalties of EUR5.6 million (US$5.8 million) in 2030, rising to EUR7.2 million in 2034.
SeaNews Turkey
According to Lloyd's Register, the rule requires shipping companies to increase use of eco fuels. While compliance with the EU Emissions Trading Scheme (ETS) represents an immediate cost, non-complying shipowners burning fossil fuel will face suffer even greater costs.
'Today, many owners and managers are concerned with the EU Emissions Trading Scheme designed to reduce emissions produced by shipping,' Ryan Bax, lead business advisory consultant at Lloyd's Register (LR), noted in a recent report from the classification society.
'However, LR projections show that the impact of FuelEU will eclipse that of the ETS around 2035 and dwarf it beyond that,' said Mr Bax. 'Business as usual is therefore no longer an option and progressive decisions must be made to deal with this challenge.'
FuelEU requires shipping companies to increase their uptake of renewable and low-carbon fuels by setting limits on the yearly average greenhouse gas (GHG) intensity of the energy used by vessels calling at European ports. The limits start this year with a two per cent reduction and require an 80 per cent reduction by 2050.
The ETS tax of 40 per cent on carbon emissions in 2024 increases to 70 per cent this year. To recover and pass on those costs to cargo owners, carriers have announced plans to simplify the process by merging compliance with the ETS and FuelEU regulations into one fuel surcharge.
Mr Bax warned that carriers adopting a 'wait-and-see' approach would find themselves subject to penalties and the need to buy surplus fuels to comply with the rule, as well as facing reduced income from customers wanting to reduce their indirect 'scope 3' value chain emissions.
The LR report estimated that for a fleet of five ships running the same marine fossil fuel mix as today, and each using 5,000 tonnes of fuel per year between 2030 and 2034, the shipowner would pay penalties of EUR5.6 million (US$5.8 million) in 2030, rising to EUR7.2 million in 2034.
SeaNews Turkey