How To Calculate Fuel EU Compliance Balance And Fuel EU Penalty?

The Fuel EU Maritime Regulation aims to reduce greenhouse gas emissions from shipping by a significant amount. This is achieved by encouraging the use of renewable and low-carbon fuels, progressively stricter limits on the GHG intensity of energy used by ships, and onshore power supply in ports. 

The regulation is aiming for at least a 55% reduction of GHG emissions by 2030 and targeting climate neutrality by 2050 in the maritime sector. It fits in with broader EU climate goals.

The FuelEU Maritime Regulation has significant financial implications for shipping companies in transitioning to new GHG intensity targets. From 2025, shipping vessels will have to attain a 2% reduction in GHG compared to the 2020 base level; this will increase to 6% by 2030 and reach a reduction of 80% by 2050. 

Non-compliance will be penalised, and the charges may be as high as €2,400 for every metric ton of VLSFO (Very Low Sulphur Fuel Oil) that is emitted, which may create significant costs for companies which do not switch to low-carbon fuels or biofuels.

Moreover, this regulation will force companies to invest more in alternative fuels and technologies, for example, onshore power supply and energy-efficient systems, thus overstretching the financial resources. 

There will also be increased operational costs as more reporting and compliance measures will be required, which will, in turn, require the use of digital solutions to efficiently manage data on emissions and predict compliance costs.

Overall, though the new regulation is intended to promote innovation and sustainability within the maritime sector, a high cost will be presented by the regulation to the shipping companies during the transition period.

Below are the steps to understand the simplified and structured way to calculate the compliance balance and penalty associated with Fuel EU Maritime regulation for each vessel.

Step 1: Calculate the GHG intensity for the vessel

Parameters required for calculation:

• Fuel consumption per fuel type (in g fuel):  Source: Noon reporting system of the vessel
• Tank-to-Wake (TtW) emission factor per fuel type (in g CO2e / MJ): Source: Annex II of the FuelEU Maritime Regulation (EU) 2023/1805 / Proof of Sustainability document 
• Well-to-Tank (WtT) emission factor per fuel type (in g CO2e / MJ): Source: Annex II of the FuelEU Maritime Regulation (EU) 2023/180/ Proof of Sustainability document
• Lower calorific value (LCV) per fuel type (in MJ / g fuel):  Source: Bunker Delivery Note / Fuel Test report
• Electricity consumption (in MJ): Source: From Electricity Delivery Note/ Port electricity meter reading / Electricity delivered to the ship per OPS connection point
• F wind: Reward factor for wind-assisted propulsion.

A simplified equation for calculating the GHG Intensity under FuelEU Maritime-

GHG actual intensity = Fwind *(WtT (Fuel, Electricity) + TtW (Combustion,Slip))

Note: please consult the FuelEU Maritime Regulation (EU) 2023/1805 for more detailed information.

Step 2: Calculate the Compliance Balance

Parameters required for calculation:

• GHG Actual intensity (in g CO2e / MJ): Calculated in Step 1 and it’s a yearly average of the GHG intensity of the energy used onboard a ship calculated for the relevant reporting period.
• GHG Target intensity (in g CO2e / MJ): Source:  GHG intensity limit of the energy used on-board a ship according to Article 4(2), FuelEU Maritime Regulation (EU) 2023/1805
• Fuel consumption per fuel type (in g fuel):  Source: Noon reporting system
• Lower calorific value (LCV) per fuel type (in MJ / g fuel):  Source: Bunker Delivery Note / Fuel Test report
• Electricity consumption (in MJ): Source: From Electricity Delivery Note/ Port electricity meter reading / Electricity delivered to the ship per OPS connection point
• Electricity consumption (in MJ): Source: From Electricity Delivery Note/ Port electricity meter reading / Electricity delivered to the ship per OPS connection point.
• Compliance Balance (gCO2eq) is reported in grams of CO2 equivalent
• For any ship having the ice class IC, IB, IA or IA Super or an equivalent ice class, the company may request, until 31 December 2034, to exclude the additional energy consumption, due to sailing in ice conditions.

A simplified equation to calculate the compliance balance under FuelEU Maritime-

Compliance Balance = (GHGTarget – GHGActual) [gCO2eq/MJ] x (Fuel * LCV [MJ]+ Electricity (MJ))

Step 3: Calculate the Fuel EU Penalty

Parameters required for calculation:

• GHG Actual intensity (in g CO2e / MJ): Calculated in Step 1 and it’s a yearly average of the GHG intensity of the energy used onboard a ship calculated for the relevant reporting period.
• Compliance balance (in g CO2e) Calculated in Step 2. Compliance Balance is the absolute value of the compliance balance 
• 41000 is 1 metric ton of VLSFO 
• 2400 is the amount to be paid in EUR per equivalent metric ton of VLSFO
• FuelEU Penalty:  Is in EUR 

Simplified Equation to calculate the penalty under FuelEU Maritime-

Fuel EU Penalty = Compliance Balance X 2400 / GHG Actual X 41000

Please refer to the annexes of the FuelEU Maritime Regulation (EU) 2023/1805 for further information.

You might also like to read-

• Green Fuels For Ships and Their Challenges
• Role of Seafarers in Maritime Decarbonization
• Why and How to Decarbonize the Marine Industry?
• Introduction To Methanol As A Sustainable Fuel For Ships
• Simplifying the Energy Efficiency Existing Ship Index (EEXI)
• Charting A Course for Shipping Decarbonisation: Key Outcomes and Analysis from MEPC 82
• Sustainability Certification for Marine Fuels
• Exploring Biofuels As A Potential Maritime Fuel of the Future
• Carbon Intensity Indicator (CII) And Actionable Solutions for Shipping Industry

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