EUR 1.3 billion in penalties for shipowners in 2025 after the launch of the FuelEU Maritime program

By Marek Grzybowski

Today, maritime transport operators, cargo handlers, terminal operators and their customers have to hold on to their pockets. 2025 will be another year of increases in maritime transport. The reason is important because shipowners and ship operators will pay EUR 1.345 billion in penalties in 2025 under FuelEU. The calculations were made based on the analysis of the technical condition of 13,000. ships over 5 thousand gt that sail to EU/EEA ports – warns OceanScore, a technology company operating in Hamburg.
The financial impact of the FuelEU Maritime project is being closely monitored by most shipping operators and their contractors. The introduction of regulations adopted by the European Parliament only on the eve of their introduction triggers emotional discussions, although maritime clusters and shipowners’ associations have already raised alarms about additional costs resulting from the ambitious goals of various EU institutions.
Today, the potential costs of introducing regulations are estimated more and more precisely. The document that raises concerns is: Regulation of the European Parliament and of The Council on the use of renewable and low-carbon fuels in maritime transport and amending Directive 2009/16/EC. Or rather, the effects it will have on fleet management costs.

The EU regulation begins with significant words: Maritime transport, generating approximately 75% of the EU’s external trade volume and 31% of the EU’s internal trade volume, is an essential element of the European transport system and plays a key role for the European economy. Every year, around 400 million passengers board or leave EU ports, including around 14 million on cruise ships.
The document highlights that maritime transport plays an important role in ensuring that islands and outlying maritime regions are connected to the rest of the single market. Efficient maritime transport connections are essential for the mobility of EU citizens, the EU’s developing regions and the EU economy as a whole. Will the regulations introduced make life easier for shipowners?

EU declarations and maritime realities
Despite such declarations, there is a danger that maritime trade may suffer significant consequences in the fight against greenhouse gas emissions. OceanScore has identified the segments that are most at risk of being charged (read: fined) for greenhouse gas emissions. The segment of older passenger ships, several-year-old container ships, as well as RoPax ships, bulk carriers and tankers are at risk.
From January 1 next year, many shipowners and… their customers will experience problems. In times of radical changes in global logistics connections, including energy resources, additional fees and penalties will have wider economic consequences. Especially since the European industry does not support shipping and ports. We wrote about it here>>
Maritime clusters had already recognized the threat a year earlier, even though the European Commission started with a modest initial target of a 2% reduction in greenhouse gas emission intensity. The European Commission, fighting against global warming, gave birth to a baby in the form of ETS fees.
It turned out that she had thrown the baby out with the bathwater into the Mediterranean Sea. This month, the maritime shipping CO2 emissions trading scheme was the subject of intense discussions led by the Malta Maritime Forum (MMF). We reported about it here >>

EUR 2,400 per tonne of VLSFO equivalent
OceanScore’s team of analysts managed to determine each vessel’s compliance balance with the guidelines set out in FuelEU and possible penalties. AIS data modeling and Thetis emissions data were used. Information on planned demand for the bunker was included, taking into account the demand for various types of ship fuel.
Advanced analytics based on artificial intelligence was used. The probable bunker mix for each ship operating on routes to and between EU ports, as well as for ships operating within ports, was analyzed.
OceanScore analysis shows that ship operators could face a penalty of EUR 2,400 per tonne of VLSFO equivalent for failing to achieve an initial emissions reduction target of 2% over the 2020 baseline. This refers to the average greenhouse gas intensity from wake state resulting from fleet energy consumption of 91.16 gCO2e per megajoule (MJ).
Analysts explain that the greenhouse gas emission intensity requirement taken into account applies to 100% of the energy consumed during cruises and port calls in the EU/EEA and 50% of cruises to and from the bloc.

 

Container ships under the weight of fines
Using criteria similar to those used in the EU Emissions Trading System (EU ETS), it was determined that the container ship segment would bear most of the FuelEU costs. This was estimated to be 29% of the gross penalties incurred by ship operators.
Another segment that will be affected by the introduction of the Fit for 55 strategy is the RoPax fleet with a 14% share. Tankers and bulk carriers will have a 13% share in the additional costs incurred resulting from ETS fees.
“It is critical for shipping companies to establish a baseline of expected FuelEU costs in order to perform appropriate planning and budgeting processes, compare different mitigation options, and decide what to do with outstanding compliance balances,” says Albrecht Grell, Managing Director of OceanScore.

Grell emphasizes that this will require, to a greater extent than the EU ETS, a corporate strategy to determine how to reduce the compliance balance, how to commercialize the surplus and deal with remaining deficits.
OceanScore has determined that liabilities per vessel will vary significantly depending on the type of vessel. This is due to the fact that operators introduce more and more types of fuels to power ships. The use of biofuels and LNG is increasing.

Sea tourists will pay the most
The largest number of fines will be imposed on passenger ships – an average of PLN 520,000. EUR per vessel per year. RoPax operators will also incur high fines – PLN 480,000. EUR and RoRo – 314 thousand EUR, and the average fine in the case of container ships will be approximately PLN 214,000. EUR – results from OceanScore calculations.
Grell points out that there are also huge discrepancies between ships in the same segments. In his opinion, many operators in the passenger and RoPax segments are exposed to fines ranging from EUR 1.8 million to EUR 2.5 million, and payment obligations in the case of some container ships will reach EUR 1 million. “This is due to higher energy consumption simply due to the ship’s size and commercial profile,” explains Grell.
Although penalties will result from so-called non-compliance for ships using conventional fuels, they can be compensated by operating ships powered by low-emission and ecological fuels. In this way, operators will receive revenues of an estimated EUR 669 million. They will be generated mainly by ships powered by LNG and LPG, which have much lower carbon dioxide emissions than ships powered by conventional fuels.
LNG tankers will generate 78% of the total surplus on the toll trading market, and gas tankers 8%. Another 8% will be provided by container ships, whose operators have introduced a significant number of ships powered by alternative fuels in recent years.

Penalties can be halved
Taking into account this estimated surplus from operating low-GHG ships, the costs incurred as a result of FuelEU shipping penalties from 2025 will amount to EUR 680 million. This can be achieved by grouping ships of one type on routes or markets. However, it must be emphasized that this will be difficult in green maritime corridors, which comprehensively cover ports and sea connections.
Penalties will be more common in shipping segments where operators typically use conventional fuels with comparable carbon intensity, such as HFO, LFO or MDO. Then the penalties will be approximately proportional to the total fuel consumption and will therefore be correlated with the cost of the EU ETS.
The initial costs of the FuelEU program for most conventionally fueled ships, before grouping, will be around one third of the costs associated with the EU ETS next year, when the second regulation will be introduced for 70% of ships, OceanScore estimates.
Experts from Hamburg assume that in the end, FuelEU will likely prove to be a much more costly endeavor as the requirement to reduce greenhouse gas emissions intensity increases to 6% by 2030 and then accelerates to 80% by 2050.
– It is therefore incumbent on shipowners to determine their strategies not only for fuel selection and onshore electricity use, but also for dealing with remaining compliance balances, such as pooling balances, banking them and borrowing balances to mitigate the financial impact of the FuelEU program, explains Grell. – However, combining loans will also involve costs, while banking and loans will involve interest costs and only shifting liabilities into the future – he reserves.

Escape to Africa
Those companies that do not avoid paying fines will look for loopholes in the regulations. In the Mediterranean, it is enough to transfer terminal activity and connections to ports in Africa. The concerns of shipowners escaping from European ports are shared by other maritime clusters in the EU. In particular those operating in the Mediterranean region.
Although the new regulations will probably also result in actions that will have negative consequences in the ports of the North Sea and the Baltic Sea. A significant part of the North Sea and Baltic ports may be at the end of feeder connections of African and Arab ports, as we wrote about here >>
Grell then points out that pooling compensation paid by different shipping companies will effectively divert cash flow from the EU that it would otherwise receive from fines under the FuelEU program – but the regulator’s intention is to reward leading operators using clean fuels.
Another factor that will reduce the EU’s potential revenue from payments and penalties is that the compliance gap has been reduced to just 1.6% by 2022 as the average greenhouse gas (GHG) emission intensity from shipping fell by 0.4 % up to 90.82 gCO2e per MJ. This was mainly due to the increased demand for transport by LNG tankers after the suspension of gas supplies via pipelines from Russia.

Compliance gap
Taking into account this trend and the growing use of biofuels, the 2% compliance gap will likely be closed before the first tightening of reduction targets in 2030, predict specialists from Hamburg.
Grell says the priority for shipping companies, especially in the early stages when cost risks are relatively low, is to deal with regulatory complexity and address risks. This is due to the fact that the party paying the penalties – the holder of the declaration of conformity or possibly the ship owner – is not, in his opinion, the entity responsible for the emissions, and is usually the charterer.
– In addition to cost oversight, companies need reliable monitoring and reporting mechanisms that include high-quality emissions data. They must also have complex contractual arrangements and robust administrative processes in place to manage compliance and mitigate the financial impact of the new regulation, Grell emphasizes.
Today we will encounter high freight rates resulting from the longer route between Asia and the EU ports, difficulties in accessing Asian terminals, higher fees and insurance. The turmoil in the maritime transport market and in the economies of Europe and the United States is explained by the need for customers to pay more for transport services.
There will be one more reason to justify the need to increase freight and ticket prices on ferries and passenger ships – fees for greenhouse gas emissions. Finally, let us remind you: OceanScore experts have calculated that today, customers of maritime transport operators must hold their pockets to pay EUR 1.345 billion in 2025.