Lloyd’s Register business development manager, shipping markets, Taylor Wamberg, says owners should avoid a ‘copy and paste’ compliance approach because of differences between EU ETS and FuelEU
With the EU Emissions Trading System (EU ETS) now in effect, most shipowners and charterers are comfortable with their plan to comply with the emissions regulation. But an executive for a leading classification society warned that interested parties should not be lulled into a “false sense of security” when devising their compliance strategy with FuelEU Maritime.
“We tend to talk about them in the same vein, but there’s a lot of subtle differences between the two regulations that offer up potential pitfalls for organisations or parties that do a copy paste and approach [to compliance]”, said Lloyd’s Register business development manager, shipping markets, Taylor Wamberg.
Speaking at the 7th Annual Capital Link Singapore Maritime Forum, Singapore, in late March, Mr Wamberg said there is “a long list of subtle and obscure differences” between the two EU regulations, four of which he highlighted during his presentation.
“There is a risk that we end up with a geographically fragmented regulatory landscape”
One difference is that fuels should be considered on a well-to-wake basis not on a tank-to-wake basis. This means selecting fuels that are certified with a lower lifecycle emission.
A second difference is that voyages that are in scope for EU ETS may be out of scope for FuelEU Maritime. This can occur, for example, where certain countries have not yet ratified the regulation.
A third difference is in how an owner accounts for fuels when sailing into and out of the EU, he noted. “It’s beneficial if you are using lower emissions fuels, yet if you are not aware of that, you won’t be able to take advantage, or you might choose a different strategy. That means you are still paying for a fuel but not getting the full credit for it,” said Mr Wamberg.
A fourth difference is that EU ETS and FuelEU Maritime have different compliance dates.
With all these differences, FuelEU also introduces “flexible compliance regimes and an element of optionality,” said Mr Wamberg, such as pooling, borrowing and banking. “With all of this complexity and optionality, there’s a lot of opportunity, if you understand the regulation, and you are able to negotiate contracts that are in your favour.”
Mr Wamberg said shipowners and charterers are faced with a complex regulatory landscape created by the EU ETS, FuelEU Maritime, and IMO’s short-term measures.
He said there was a “risk that we end up with a geographically fragmented regulatory landscape.”
However, Mr Wamberg said some clarity might be forthcoming from the 83rd session of the IMO Marine Environment Protection Committee (MEPC 83). Delegates at MEPC 83, held 7-11 April in London, are expected to agree on new mid-term measures including a global marine fuel standard to regulate the phased reduction of greenhouse gas (GHG) intensity of marine fuels, and a global pricing mechanism for GHG emissions from ships.
Beyond just encouraging the marine industry “down the road of decarbonisation,” he said, these emissions regulations require co-operation or collaboration by two parties to succeed.
“That’s particularly true for EU ETS,” said Mr Wamberg. Lloyd’s Register estimates the industry will require about 34M European Union Allowances (EUAs) to account for the shipping activities into and out of in the EU.
“If we look at how much the market rate of an EUA is anywhere from sort of €58 to €90 (US$63-US$97) — it fluctuates. That’s quite a significant cost to shipping that we need to try and account for,” he said.
