FuelEU: A complex beast compared to ETS

Latest European emissions control regulation is harder to digest

By Carly Fields

The maritime industry is grappling with the intricacies of FuelEU Maritime, a regulatory landscape that has proven far more complex than its predecessor, the EU Emissions Trading System (ETS). Speaking at the Baltic Exchange Tanker & Gas Market Insight Forum at IE week 2025, according to Philip Roche, partner at Norton Rose Fulbright LLP, expressed a candid view of the challenges facing the sector.

"I regret the day I said I would look at FuelEU, because it has taken over my life a little bit," Roche said, highlighting the sheer complexity of the new regulations. He contrasted the relatively straightforward implementation of the EU ETS with the convoluted compliance strategies required by FuelEU.

It was a good place to start, in a way, it got people thinking about these things," he said.

While the industry has managed to navigate the ETS framework with the aid of clauses, such as those initially drafted by BIMCO, FuelEU presents a different challenge. "There is a real concern with FuelEU that people don't want to enter into agreements that six months or a year down the road, turn out not to have been quite a good idea," Roche said.

A key point of contention revolves around the allocation of compliance burdens and penalties. "There is a general consensus that if you have a time-chartered ship, it should be the buyer of the fuel who bears the burden of non-compliance and the penalties by way of surcharge, as the BIMCO clause discusses it. But surprisingly, a few have pushed back quite hard and said, 'No, this is not what was intended'," Roche said.

Compliance complexity

Unlike the straightforward "emit and surrender" approach of the ETS, FuelEU demands intricate compliance strategies, including banking, borrowing, and pooling. "Who is going to deal with these strategies depends on who's buying the fuel it seems to us. So, owners, in some cases, if they're purchasing the fuel, but quite often time charterers," Roche said.

The availability of low GHG fuels, particularly biofuels, plays a crucial role in enabling effective pooling strategies. "Much strategy will be dependent on whether biofuels or other low GHG fuels can be purchased, because pooling doesn't work, really, unless you have a ship or two which is burning this low GHG intensity fuel," he said.

Furthermore, the requirement for consistent verifiers across pooling arrangements has caused confusion. "We have seen the question, and I think ship owners have got a bit confused about this, that you have to have the same verifier, and they see that as being a problem," Roche said. 

The absence of standardised pooling agreements adds another layer of complexity.

And so we are waiting to see some of those and see how ship owners are going to try and co-operate with the charterer to deal with this in the most advantageous way, or least disadvantageous way for everybody," Roche said.

Also on the panel, Steve Laybourn, manager, carbon and new markets / chartering team at Ardmore Shipping, reflected on his predictions from the previous year, acknowledging the prescience of warnings regarding FuelEU's complexity. "I remember, I believe it was you, Philip, who said, ‘you know, if you think ETS is complicated, wait till you see FuelEU’. And if you're not looking at it yet, then you really should be," he said.

Despite the initial hurdles, Ardmore has managed to navigate the ETS, albeit with some unexpected bureaucratic delays. "The bureaucracy was greater than I thought it would be. As I sit here, our operator holding account still isn't active," Laybourn said, citing a persistent backlog with Dutch authorities. However, he also noted that while he was most concerned about Ardmore’s trading strategy, that has turned out to be the “easiest part”. The company has secured its required EUAs for the year, with its ISM joint venture taking on the surrender responsibility.

The administrative burden, however, has been substantial. "Administrative burden has been quite significant. This year, we had to look at our internal processes to allow for the ETS changes to our voyage management system, and we had to buy a new platform to track our EUAs and allocate them against voyages," Laybourn said. 

Challenge on the horizon

Looking ahead to FuelEU Maritime, Laybourn anticipates a significantly thornier landscape. "We're expecting a lot of similar issues, but just more complex," he stated. A key difference lies in the inability to delegate FuelEU compliance, placing the onus squarely on the ISM company. "Unlike the ETS, our ISM company is the only company that is responsible for FuelEU. There's no ability to delegate like there was with ETS," he said.

Laybourn highlighted the multifaceted nature of FuelEU compliance, emphasising the lack of a one-size-fits-all solution.

Key considerations include dual-fuel capabilities, wind assistance, shore power connectivity, and, crucially, access to biofuels. "You know where you're trading and if, like ourselves, you're tramping around the world, you don't always have access to the biofuel blends because that's really only available in a few of the hubs right now," he said.

Laybourn agreed with Roche that pooling as a potential compliance strategy remains somewhat opaque. "It's still a little bit unclear in my head exactly how it's going to work," he said, anticipating that pooling will likely be more expensive than direct biofuel procurement, but offers the benefit of outsourced compliance. "I believe it will be more expensive than buying the biofuel but that's because you're essentially paying for a service, you're not having to do it yourself, because there are definite risks to burning biofuel on your ships."

Laybourn concluded by acknowledging the industry's collective uncertainty. "At this point, two months into FuelEU, there are definitely going to be more questions than answers, so don't feel too bad at not really understanding it.”