Fuel EU Maritime - Implications for Tanker Costs

As we approach the FuelEU maritime implementation date of 1 January 2025, with the submission of Monitoring Plans by 31 August 2024, an analysis of this regulation’s cost implications becomes increasingly relevant. Unlike the EU ETS directive that covers tank to wake (TtW) carbon emissions, where emissions allowances have to be surrendered gradually from 2024 onwards and paid for under a fluctuating CO2 price, the Fuel EU Maritime regulation covers the well to wake (WtW) scope of GHG emissions intensity.

Fuel EU Compliance Costs to overtake EU ETS costs post 2035. The EU ETS compliance costs for tankers will fluctuate with the volume of emissions emitted and the CO2 price traded. Assuming a rising trajectory in EU ETS prices of close to €80 per ton CO2 in 2025 and €130 per ton CO2 in 2030, if the fleet’s trading profile and emissions were to remain stable at 2023 levels, then the EU ETS compliance cost for the tanker sector is estimated to amount to more than €800 million in 2025 and more than €2 billion in 2030 and 2035. In the initial years, the FuelEU maritime compliance costs are estimated below those of EU ETS. However, as GHG intensity reduction targets become stricter from 2030 onwards and particularly 2035, Fuel EU compliance costs are estimated to overtake EU ETS costs if the fleet profile remained the same in terms of the fuel types used. In 2025, the FuelEU cost for the average tanker in the MRV fleet is estimated at €340 million for the entire fleet, escalating above €1 billion in 2030 and above €2.6 billion in 2035. The FuelEU penalties involved escalate in time and post 2035, the steeper GHG intensity reduction targets lead to penalties above $380/ton of VLSFO equivalent compared to just $65/ton of VLSFO equivalent in 2025-2029. This cost escalation aims at narrowing the price gap between fossil fuels and zero carbon fuels.