FuelEU Maritime Series – Part 4: Compliance and Adjustment Mechanisms

In the fourth instalment of our six-part series uncovering the FuelEU Maritime Regulation, we examine the steps required to achieve compliance with the regulatory requirements and review how the adjustment mechanisms of borrowing, banking and pooling work.

COMPLIANCE - What steps must be followed to achieve compliance with FuelEU Maritime?

As discussed in our previous articles, the FuelEU Maritime Regulation[1] (the Regulation), aims to limit the greenhouse gas (GHG) intensity of fuels used in the maritime industry and to contribute to the EU’s goal of achieving climate neutrality by 2050.

The Regulation sets out a series of obligations which must be followed by the entity responsible for compliance - whether this be the shipowner, the manager, the bareboat charterer, or any other responsible organisation (we will refer to them as the “company”) - to ensure that the requirements are met and no penalties are incurred. 

The steps and schedule for the first year of application (2025) are set out below (for an overview of the timeline, please see Part 3 of our Series here):

Monitoring plan

By 31 August 2024, the companies must have already submitted their FuelEU Monitoring Plans showing how they intend to monitor and report the amount, type and emission factor of energy used for each of the vessels of their fleet to an EU-authorised verifier.

For vessels falling under the scope of this Regulation for the first time after 31 August 2024, companies are required to submit a monitoring plan no later than two months after each vessel’s first call at an EU/EEA port.

Monitoring and recording period

From 1 January 2025, the FuelEU Monitoring Plans will start to apply, and companies will need to record the GHG intensity of each vessel.

The following information will have to be collected and reported:

1.  The port of departure and port of arrival including the date and time of departure and arrival, and the time spent at berth.
2. For vessels under an obligation to connect to onshore power supply (OPS) (container and passenger vessels over 5,000 GT), the connection and use of OPS or the application of any relevant exception. 
3. Confirmation of the amount of electricity delivered to the vessel while using OPS.
4. The amount of fuel (per type of fuel) consumed at berth and at sea.
5. The “well-to-wake” emissions for each type of fuel consumed at berth and at sea, broken down by “well-to-tank”, “tank-to-wake” and “fugitive emissions” resulting from slipped fuel, covering carbon dioxide (CO₂), methane (CH₄) and nitrous oxide (N₂O).
6. The amount of each type of substitute source of energy consumed at berth and at sea.
7. The vessel’s ice class, if the company requested the exclusion of the additional energy used from the calculation of the compliance balance due to the vessel’s ice class.
8. The date, time and position of the vessel when entering and leaving the ice conditions, as well as the type of fuel consumed and the distance travelled when navigating in such conditions, if the company requests the exclusion of any additional energy used due to sailing in ice conditions, from the final calculation of the compliance balance.

It is worth noting that the reporting period will be running from the 1st of January to the 31st of December of any given year.

Verification period

By 31 January 2026, and for each subsequent year, the company must provide their verifier the information listed above in the form of a FuelEU report. If ownership of a vessel changes during the course of a reporting year, the company operating the vessel at the end of the reporting period will have to ensure that all compliance responsibilities for the entire reporting period have been met.

The transferring company will have to also report to their verifier all data collected within the relevant reporting year up to, as close as possible, the date of transfer of the ownership and no later than one month thereafter. It is worth noting that the compliance responsibilities “follow” the vessel and any GHG intensity surplus or deficit will follow that vessel despite any transfers of ownership. 

By 31 March 2026 and for each subsequent year, the verifier will have completed its annual assessment of each FuelEU report, notified the company of the results, and recorded in the FuelEU database the following information and documentation:

1. the verification report, stating whether the vessel complies or not with the FuelEU Maritime Regulation, and if it does, the verifier will also record the relevant vessel FuelEU report.
2. the annual average GHG intensity of the energy used by the vessel.
3. the vessel’s “compliance balance”.
4. where applicable, the number of non-compliant port calls made in the latest reporting period, including any time spent moored at berth or at anchorage, as well as each port call requiring OPS (as applicable).
5. the annual amount of energy used on board the vessel, excluding any energy supplied via OPS.
6. the annual amount of energy used on board the vessel from “renewable fuels of non-biological origin” (RFNBOs).

Compliance mechanisms

By 30 April 2026, and by the same date for each subsequent year, companies must notify their verifiers which compliance mechanism they intend to adopt, e.g. to bank, borrow, or pool any GHG intensity surplus or deficit in order to minimise their financial exposure.

The verifier must provide its approval prior to any banking or borrowing of any surplus or deficit and such approval must be recorded in the Fuel EU database. The verifier must also record in the Fuel EU database any pooling arrangements.

By the same deadline, the verifier will have to report the following details back to the company:

1. the vessel’s annual compliance balance which must factor the compliance mechanisms applied.
2. the RFNBO sub-target (if applicable).
3. any applicable FuelEU penalty.

From 1 May and by 30 June 2026 and in each subsequent year, the company will have to pay a penalty if a vessel has failed to meet the following criteria:

1. if it has exceeded its GHG intensity limit.
2. if it does not meet the RFNBO sub target (when applicable).
3. if it had made any non-compliant OPS port calls (this will be applicable from 2030).

Any applicable penalties must be settled prior to 30 June which coincides with the deadline for the issuance of the Fuel EU “Document of Compliance” (DoC). The funds corresponding to the penalties will be used to financially support projects of the European Union intended to decarbonise the maritime sector.

Document of Compliance

By 30 June 2026, the initial FuelEU DoC must be issued by the verifier.

1. the verifier will be issuing an annual FuelEU DoC for each vessel reported, if the vessel has no compliance deficits or has made no non-compliant port calls.
2. an administering state will issue a FuelEU DoC for each vessel that had a compliance deficit but has paid outstanding penalties.

The FuelEU DoC is valid for a period of 18 months after the end of the reporting period, i.e. (for the 2025 reporting period, the DoC will be valid until the 30 June 2027) or until a new FuelEU DoC is issued, whichever occurs earlier.

Vessels that fall within the spectrum of applicability of the FuelEU Maritime Regulation must carry a valid FuelEU DoC when entering an EU/EEA port.

However, a vessel may be banned, by way of an expulsion order, from entering EU/EEA ports (save for the ports of the Member State under which the vessel is flagged) if it fails to present a valid FuelEU DoC for two or more consecutive reporting periods.

The flag Member State will order a flag detention, while that vessel is in one of its ports, after giving the opportunity to the company concerned to submit its observations, and up until the company fulfils its obligations. 

From 1 January 2030: All container and passenger vessels over 5,000 GT that fall within the FuelEU Maritime Regulation applicability spectrum and that enter EU/EEA ports must connect with OPS, when berthing at Trans-European Transport Network ports (TEN-T ports) save for certain exceptions, including when they: .

1.  stay at port for less than two hours,
2.  use zero-emission technology whilst at berth, or
3.  make an emergency port call.

From 1 January 2035: Passenger and container vessels over 5,000 GT entering all EU/EEA ports must make use of OPS, when available, to ensure that they  meet the zero-emission berthing requirements.

ADJUSTMENT - How do the banking, borrowing, and pooling mechanisms work?

The FuelEU Maritime Regulation makes three adjustment mechanisms available to companies to help them manage their compliance balance surplus or their compliance balance deficit over a reporting period. See Articles 20 and 21. These are known as banking, borrowing and pooling.

Banking

If, following a specific reporting period, a vessel has a positive compliance balance, meaning that the calculated GHG intensity for the energy used onboard the vessel sits below the intensity limit cap (as set out in Article 4(2) – see Part 3 of our Series here), the company may bank this compliance surplus, for future use, to the next reporting period in the FuelEU database. This is subject to approval by the verifier.

Banking can be carried out over one or more successive years. How it works is that the surplus gets accumulated for the following reporting period. Crucially, a banked compliance surplus does not expire.

It should be noted, however, that a company can no longer bank a compliance surplus once the FuelEU Document of Compliance for the vessel in question has been issued.

Borrowing

On the other hand, where for a specific reporting period, a vessel has a negative compliance balance, meaning that the calculated GHG intensity for the energy used onboard the vessel scores higher than the intensity limit cap (as set out in Article 4(2) – see Part 3 of our Series here), the company may borrow an advance compliance surplus for the equivalent amount from the next reporting period.

This advance compliance surplus taken from the following reporting period will be added to the vessel’s compliance balance in the current reporting period to cancel out a deficit. In return, the borrowed compliance surplus plus an additional 10% surcharge will be subtracted from the same vessel’s compliance balance in the next reporting period. It is important to note that surplus units cannot be exchanged between vessels, whether from the same or from different companies.

The advance compliance surplus cannot be borrowed (a) for an amount exceeding, by over 2 %, the applicable GHG intensity limit multiplied by the energy consumption of the vessel, or (b) for two consecutive reporting periods.

Pooling

The pooling mechanism, set out in Article 21, is designed to enable vessels less capable of finding technical compliance options, to abide by FuelEU Maritime Regulation targets.  A pool can be composed of vessels with different owners, different shipping companies and different verifiers. However, the pool itself must only have one verifier, whose job it is to manage and allocate the compliance surplus/deficit of the pool.

Unlike banking and borrowing, where surplus units cannot be exchanged between vessels, pooling makes it possible to share compliance surplus with other vessels.

For starters, only vessels holding a valid FuelEU Document of Compliance will be able to participate in a pool, and a vessel’s compliance balance cannot be included in more than one pool in the same reporting period.

However, it is possible to use two separate pools for (1) the GHG intensity target and (2) the RFNBO subtarget.

By way of reminder of what the “RFNBO subtarget” is, we turn to Article 5(3) of the Regulation. This sets out that where, for the reporting period 2031, the share of RFNBO in the yearly energy used on board by a vessel is less than 1 %, a subtarget of 2 % shall apply for such fuels in the yearly energy used on board by a vessel from 1 January 2034.

It should be noted that a vessel participating in a pool will not be able to borrow an advance compliance surplus from the next reporting period.

With regards to creating a pool, a company will be required to register in the FuelEU database:

1. its intention to include a vessel’s compliance balance in the pool.
2. the allocation of the total pool compliance balance to each individual vessel, and
3. the choice of a single verifier selected for checking that allocation.

The FuelEU database will technically confirm the establishment of the pool.

Where the vessels participating in a pool are controlled by two or more companies, all companies concerned will be required to validate the pool details, including the allocation of the total pool compliance to each one of the pool’s individual vessels and the choice of a single verifier.

While there is no fixed deadline for indicating the intent to pool, by 30 April of the relevant verification period, the selected verifier will be required to record, in the FuelEU database, the pool’s definitive composition and the specific compliance balance allocation to each vessel.

The validity of a pool is dependent on ensuring that a vessel with a compliance deficit does not end up with a higher compliance deficit, and a vessel with a compliance surplus does not end up with a compliance deficit.

Can an excess compliance be sold?

In short, no: “surplus units cannot be exchanged between ships, neither between ships of the same company nor between ships of different companies. Only through pooling it will be possible to make use of compliance surplus across with other ships.”

However, a company could “buy” its way into a pool (with vessels that that company does not control) that had excess compliance credits. For example, if Company A ran a fleet of ammonia fuelled vessels, Company B may want to pay Company A to allow Company B to pool with Company A and use the excess compliance. 

Read more on the Decarbonisation of the Maritime Industry