Accessibility links Skip to main content

Flexibility mechanisms under FuelEU Maritime - Banking, borrowing and pooling.

Flexibility mechanisms under FuelEU Maritime - banking, borrowing and pooling

Normec Verifavia
Continue reading

Flexibility mechanisms under FuelEU Maritime - Banking, borrowing and pooling

The FuelEU Maritime regulation is a cornerstone of the European Union's Fit for 55 package, aimed at significantly reducing greenhouse gas emissions from the maritime sector. Starting Jan. 1, 2025, this regulation requires all commercial vessels with a gross tonnage of more than 5,000 operating in EU waters to gradually reduce their greenhouse gas intensity, with specific targets for every five years until 2050. The regulation uses a comprehensive well-to-wake approach, taking into account emissions throughout the fuel's life cycle, including extraction, production and consumption.

To facilitate compliance with these stringent greenhouse gas intensity limits, the FuelEU Maritime Regulation introduces several flexibility mechanisms. These mechanisms are designed to provide the shipowner or the ISM company that has assumed responsibility on behalf of the shipowner, hereafter referred to as the responsible entity, with the necessary tools to manage compliance, mitigate financial risks, and promote the transition to renewable and low-carbon fuels, thereby supporting the EU's broader climate goals.

Type of mechanisms

Banking under FuelEU Maritime.

The savings mechanism allows responsible entities to carry over compliance surpluses from one reporting period to the next, enabling strategic management of compliance balances.

Limits
  1. Allowability: Surpluses can only be hoarded once per reporting period.
  2. Sequential hoarding: Savings can be accumulated in one, two or more consecutive years. Accrued compliance surpluses do not expire. If compliance balances are positive for 2 or more consecutive years, the surplus is accumulated cumulatively until the next reporting period.
  3. Restrictions: Savings are not allowed after issuance of the FuelEU Document of Compliance.

Example

A vessel operating exclusively on RFNBOs consuming 8000 MT of e-diesel and 5500 MT of e-methanol in the year 2025.

Dates and timelines

Beginning of banking: March 2026
End of banking: No more banking after the issuance of the FuelEU Document of Compliance, deadline June 30, 2026.

Borrowing under FuelEU Maritime

The borrowing mechanism under the FuelEU Maritime regulation allows responsible entities to offset shortfalls in the compliance balance by borrowing the prepaid compliance surplus from the next reporting period.

Limits

  • Borrowing for one reporting period: Borrowing is limited to one reporting period; a compliance surplus cannot be borrowed for two consecutive periods.
  • Borrowing limit [gCO2eq] = 2% of the greenhouse gas intensity limit for the year [gCO2eq/MJ] x energy consumption for the year [MJ].
  • Determine next year's compliance balance: Next year's compliance balance is adjusted based on the current year's performance, including adjustments for banking or borrowing.
  • Repayment: The borrowing surplus, plus a10% surcharge, is deducted from the ship's compliance balance in the next reporting period:
  • Repayment compliance balance [gCO2eq] = borrowed compliance balance [gCO2eq] × 1.1
  • Participation in pooling: Borrowing is not allowed if the ship participates in pooling.
  • Deficit calculation: If a vessel has a deficit on the compliance balance, the amount borrowed must match the deficit:

Example
A ship has consumed 7500 MT of MDO and 4000 MT of HFO in 2025.

Compliance balance: - 781578200.00 [gCO2eq] = -781.57 tCO2eq
Refund compliance balance = Borrowed balance x 1.1 = [gCO2eq].

Dates and timelines

  • Start of borrowing: Available from March 2026, in line with regulation implementation.
  • Reporting periods: Compliance is assessed annually, with borrowing options available immediately after verification of the annual compliance balance report deadline March 31, 2026.
  • End of borrowing: Borrowing is not allowed after the issuance of the FuelEU Document of Compliance for that reporting period, deadline June 30, 2026.

Pooling mechanism under FuelEU Maritime

Pooling allows shipping companies to exchange their compliance balances for either GHG intensity or RFNBO, ensuring that their net compliance balance after pooling is positive, while also keeping the net compliance balance for the pool positive.

The regulation establishes two separate compliance pools: one for the RFNBO sub-target and one for the GHG intensity target, allowing companies to strategically manage their compliance. Keep in mind that the RFNBO sub-target will only apply from 2033 if the industry is unable to achieve an average of 1% RFNBO use by 2032.

Requirements

  • Registration: Companies must register their pools separately in the FuelEU database to ensure compliance with both the RFNBO and GHG intensity targets.
  • Selection of verifier: An accredited verifier must oversee the pooling agreement.
Limits
  • Total compliance: The pooled compliance balance must be positive.
  • Duplicity: A vessel's compliance balance can only be included in one pool during the same reporting period, either for RFNBO or GHG intensity.
  • Deficit management: Ships with deficits can accumulate a higher compliance balance and accumulate their excess compliance balances, provided the net compliance balance of the pool is positive.
  • One pool: A ship's compliance balance can only be accumulated in one pool.
  • Borrowing: Borrowing is not allowed for pooled vessels.

Total compliance in pool:

Total pooled compliance = ∑ (individual vessel compliance balances).

Allocation: This allocation process allows ships with positive compliance balances to compensate those ships that lack compliance balances, promoting a collaborative approach to compliance.

Example

  • Ship A: +6422.01 tCO2eq (from the compliance calculation in the previous example of a ship using RFNBOs)
  • Ship B: -781.57 tCO2eq (from the compliance calculation in the previous example of a ship using HFO & MDO)

Total combined compliance: + 5640.43 tCO2eq

After aggregation Compliance Balance Allocation:

  • Ship A: + 5000 tCO2eq (gave 1422.01 to Ship B, can save remaining CB)
  • Ship B: +640.44 tCO2eq (received 1422.01 from Ship A, can set aside +640.44 for next reporting year.

Dates and timelines.

  • By April 30 of the verification period, the selected verifier records in the FuelEU database the final composition of the pool and the allocation of the pool's total compliance balance to each individual ship.

Conditions for pooling.

  • Total compliance must be positive.
  • Ships with deficits must not exceed the original deficits after allocation.
  • Ships with surpluses must not incur deficits after allocation.

Answers to the most frequently asked questions

The shipping companies participating in a pool jointly select a verifier. All participating companies must agree on this selection and register it in the FuelEU database. The verifier oversees the compliance verification process for the pooled vessels.

Reference: Article 21 of the FuelEU Maritime Regulation outlines the requirements for pooling and compliance verification.

When multiple companies participate in a pool, they must agree on one verifier to ensure consistent oversight of compliance balances. The selected verifier will control the allocation of compliance balances among all vessels in the pool.

Reference: Article 21 of the Fuel EU Shipping Regulation specifies the conditions for pooling and the role of verifiers.

When a FuelEU Maritime Pool has a positive compliance balance, the compliance surplus can be allocated to participating vessels. This distribution is intended to compensate vessels that have overperformed (i.e., vessels with a compliance surplus) for vessels that have underperformed (i.e., vessels with a compliance deficit).

Yes, vessels participating in pooling can bank any excess compliance balance resulting from the pooling allocation for use in future reporting periods, provided they comply with the banking rules.

Reference: Article 20 of the FuelEU Maritime Regulation describes the banking mechanism and its compatibility with pooling.

No, vessels participating in a pool cannot borrow early compliance surpluses. They must rely solely on the pool's total compliance balance and allocation.

Reference: Article 21 of the FuelEU Maritime Regulation clarifies that borrowing is not permitted for vessels in a pooling arrangement.

If a vessel is sold during the reporting year, the selling shipping company must prepare a partial issue report up to the date of sale. The acquiring company assumes responsibility for the vessel's compliance for the remainder of the year. Any borrowed compliance balance remains the responsibility of the selling company.

Reference: Article 15 of the FuelEU Maritime Regulation describes the responsibilities of companies in the event of a change of ownership.

Yes, the FuelEU Shipping Regulation provides comprehensive guidelines for pooling, verifier selection, and compliance management. Specific articles such as Article 20 (Banking), Article 21 (Pooling) and Article 15 (Change of ownership) detail the processes and requirements for compliance under the regulation.

Normec Verifavia can perform a detailed analysis based on your fleet profile and fuel types. Please contact us for a personalized assessment.