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Friday, October 15, 2021 

In July 2021, the European Commission launched its 'Fit for 55' package of proposals intended to reduce the EUs total GHG emissions by 55% by 2030, paving the way for full EU decarbonisation by 2050, and DNV has drawn its clients' attention to these new stringent EU regulations.

The cross-industry Fit for 55 package includes four particularly noteworthy proposals for shipping:

  • The European Trading System (ETS) Directive
  • The FuelEU Maritime Regulation
  • The Alternative Fuels Infrastructure Regulation
  • The Energy Taxation Directive

These are proposals put forward by the European Commission, and negotiations with the European Parliament and the European Council are just starting. These negotiations will be lengthy and complex, and we expect it to be well into 2022 before we start seeing agreed outcomes. Regardless of the outcomes of the upcoming discussions, DNV considers there will be no doubt the final regulations and directives will have a significant impact on shipping.

Shipping will become subject to the ETS as of 2023, with the ships presently reporting emissions under the EU MRV regulation required to purchase CO2 emission credits. All intra-EU emissions will be included, but only 50% of the emissions for voyages when arriving in or departing from the EU. There will also be a phase-in period starting with 20% coverage in 2023 and increasing to 100% in 2026. Non-compliance is fined and may eventually lead to a ban from EU waters.

The FuelEU Maritime Regulation will come into effect in 2025, imposing life cycle GHG footprint requirements on the energy used on board ships. It will apply to the same ships that are covered by the EU MRV regulation and will, in addition to CO2, cover methane and nitrous oxide, all in a well-to-wake perspective. The GHG intensity of the energy used will be required to improve by 2% in 2025 relative to 2020, ramping up to 75% by 2050. Credits will be granted for energy generated on board, such as by wind power. The regulation will also require container and passenger vessels to connect to shore power from 2030 for stays longer than two hours. Same as for the ETS, non-compliance may lead to fines and being banned from EU waters.

The Alternative Fuels Infrastructure Regulation is an update of an existing directive and will require EU member states to ramp up the availability of LNG by 2025 and onshore electrical power supply by 2030 in core EU ports.

The Energy Taxation Directive is being revised to remove the tax exemption for conventional fuels used between EU ports as of 1 January 2023. International bunker for extra-EU voyages remains tax exempt. For heavy fuel oil, the new tax rate will be approximately €37 per tonne. LNG will initially be taxed at a rate of €0.6/GJ. Alternative fuels will be tax exempt for a 10-year period.

DNV points out that these EU regulations will be in addition to the IMO regulations on GHG reduction. From a strategic perspective, customers are advised to start planning their decarbonisation efforts as outlined in the latest version of DNV's Maritime Forecast to 2050.

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