As we approach 2025, today’s newsletter focuses on the challenges and opportunities for fuel suppliers under FuelEU Maritime. We’ll explore the key obstacles suppliers may face, such as the need for certification and reporting, as well as the strategies that can help you turn these challenges into opportunities.
Infrastructure and Investment Challenges
FuelEU Maritime’s mission of increasing the uptake of alternative fuels in shipping requires significant investments in infrastructure for producing and supplying renewable and low-carbon fuels, particularly Renewable Fuels of Non-Biological Origin (RFNBOs). The regulation emphasizes a well-to-wake approach, meaning suppliers must track and report emissions across the fuels’ entire upstream—from production to bunkering.
Compliance and Reporting Complexities
Fuel suppliers are required to rigorously document and report the GHG intensity of the fuels they provide. This involves maintaining records throughout the supply chain and ensuring that all relevant data is verified by an accredited third party. For the non-fossil fuels, this means that:
RFNBOs must satisfy the definition in Article 2(36) of Directive 2018/2001, showcase at least 70% GHG emissions reduction against the Renewable Energy Directive (RED), and comply with the renewable electricity sourcing rules as per Article 27(6) of Directive 2018/2001. Please also note the additionality requirements for sourcing renewable electricity as per Delegated Act 2023/1184.
Biofuels must meet the criteria in Article 29(2 to 7) of Directive 2018/2001 and satisfy the minimum GHG emission savings as per Article 29(10) of Directive 2018/2001. Please note that all fuels from food or feed crops are not allowed under FuelEU Maritime except those under Annex IX of the Delegated Act 2024/1405.
Other fuels eligible for compliance are recycled carbon fuels (RCFs) as per Article 2(35) of Directive 2018/2001 and low-carbon fuels (LCFs) as per Article 2(13) of Directive 2024/1788.
The complexity increases when suppliers are involved in the production of mixed fuels or biofuel blends, as each component must be certified and tracked under schemes like the Mass Balance approach within the RED framework (refer to Article 30 of Directive 2018/2001)
The Mass Balance system allows for the mixing of sustainable and conventional fuels, with the sustainability characteristics of the inputs being traced and attributed to outputs proportionally. This is particularly important when suppliers need to demonstrate the renewable content and sustainability of the fuels they provide to comply with FuelEU Maritime’s requirements.
Reporting and certifications are essential for ensuring that the fuels supplied are compliant with the regulation and can be confidently used by shipping companies seeking to meet their GHG intensity target under FuelEU Maritime. The fuel suppliers’ document stating adherence to the above-mentioned criteria and certification schemes is ultimately the so-called Proof of Sustainability (PoS).
Leveraging Flexibility Mechanisms and Innovative Strategies
Under the FuelEU Maritime regulation, the ISM company, in most cases the ship manager, is responsible for a ship’s compliance. This entity also 'owns' any compliance surplus generated by the ship, which can be traded or banked for future use, if not otherwise stated in contractual agreements between the different stakeholders.
The latter-mentioned contractual arrangements, however, can create new opportunities for fuel suppliers:
Subsidized Fuel Provision: A fuel supplier may agree to provide a more expensive, yet highly compliant fuel to the shipping company on a long-term offtake agreement at a subsidized price. In exchange, the fuel supplier retains ownership of any compliance surplus generated by the ship throughout the agreement.
Trading Surplus on a Marketplace: The fuel supplier can then trade this surplus on a compliance marketplace, like BetterSea’s FuelEU Marketplace, where it can be pooled with other ships to optimize compliance. This allows the supplier to recover the subsidies provided and potentially profit, by taking on the risk associated with fluctuating market prices.
These mechanisms offer a unique, new way for fuel suppliers to participate in the emerging compliance trading landscape, beyond merely supplying fuel. By owning and trading compliance surpluses, suppliers can provide shipping companies with planning security, de-risking their investments through subsidized long-term offtake agreements, while potentially increasing revenues through trading the surplus smartly throughout the compliance year.
Strategic Steps Forward for Fuel Suppliers Under FuelEU Maritime
To capitalize on these opportunities, fuel suppliers should consider the following strategies:
Invest in Certification: Ensure all fuels are certified under recognized schemes to meet the stringent requirements of FuelEU Maritime.
Innovate Contractually: Explore new contractual arrangements that allow you to own and trade compliance surpluses, improving the price attractiveness of your fuels and potentially adding a new revenue stream to your business.
Stay tuned for more insights on navigating these complex challenges in our upcoming newsletters. If you have any questions or want to learn more about how BetterSea’s solutions can help you stay ahead in this evolving landscape, feel free to reach out!
Best regards,
The BetterSea Team
Contact Us: info@bettersea.tech
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