Penalty Calculations under FuelEU Maritime

The FuelEU Maritime regulation aims to reduce greenhouse gas (GHG) emissions from the maritime sector by mandating strict GHG intensity limits and shore power requirements for ships over 5,000 gross tonnage engaged in commercial passenger or cargo transport. The GHG intensity limit, expressed in grams of CO2 equivalent per megajoule (gCO2 eq/MJ), will be progressively tightened, targeting an 80% reduction by 2050 compared to a reference value of 91.16 gCO2 eq/MJ. The specific annual reduction targets are set at 2% for 2025, 6% for 2030, 14.5% for 2035, 31% for 2040, and 62% for 2045.

Type and Timeline for implementation of the penalties:

Non-Compliant with GHG Intensity: The penalties for non-compliance with GHG intensity requirements are applicable for the reporting period starting 1 January 2025. This is when companies must begin to meet the limits on the yearly average GHG intensity of the energy used on board their ships.

GHG Intensity Penalty: $Penalty=\frac{GHG_{Target}-GHG_{Actual}}{GHG_{Actual}}\times Energy_{per fuel type}\times\frac{2400}{41000}$

Where

GHGTarget = GHG Intensity target for the reporting year.
GHGActual = GHG Intensity achieved during the reporting year.
Energy per fuel type: Mi (Mass of Fuel used) x LCVi (Lower Calorific Value as per regulation)

Non-Compliance with RFNBO Sub target: The Renewable Fuels of Non-Biological Origin (RFNBO) sub target aims to enhance sustainable fuel use in the maritime sector, with a 2% target for RFNBO implementation starting 1 January 2034, contingent on monitoring results showing less than 1% usage in 2031. To incentivize early adoption, a reward factor of 2 will apply from 1 January 2025 to 31 December 2033, allowing energy from RFNBO to be counted as double in GHG intensity calculations. This framework encourages ship operators to integrate RFNBO into their fuel mix, facilitating a transition to more sustainable maritime practices.

Penalty for RFNBO: $FuelEU Penalty(RFNBO _{Subtarget})=\frac{CB_{RFNBO}}{41000}\times P_{d}$

Where:

CBRFNBO: This is the value of the compliance balance for RFNBO. It represents the difference between the required and the actual use of RFNBO on board the ship.
41,000: This is a constant that represents the energy equivalent of 1 metric ton of Very Low Sulphur Fuel Oil (VLSFO), which is equivalent to 41,000 MJ.
Pd: This is the price difference between RFNBO and fossil fuel compatible with ship installation. It reflects the additional cost incurred by using RFNBO compared to traditional fossil fuels.

Non-Compliant Port of Call (OPS): A non-compliant port call under the FuelEU Maritime regulation occurs when a ship does not meet the established requirements related to Onshore Power Supply (OPS) and greenhouse gas (GHG) intensity limits. This regulation primarily targets containerships and passenger ships, with Member States having the discretion to extend these obligations to other vessel types. Starting from 1 January 2030, ships berthed at ports with OPS infrastructure must connect to it, or they will be considered non-compliant. Exceptions to this requirement may apply if the ship could not be aware of OPS unavailability or if the OPS were incompatible with the ship’s systems.

OPS Penalty = € 1.5 × Total Electrical Power Demand × Total number of hours

Pre-requisites for Penalty Calculations:

GHG Intensity Calculation

For the Reporting Period 2025, Let us take an example of a containership with 100% voyages inside the EU, consuming 13,700 mT HFO and 1,600 mT MDO per annum for understanding the potential penalties for FuelEU Maritime.

The GHG intensity of the energy used on board a ship is calculated using the following formula: $GHG Intensity[\frac{gCO_{2}eq}{MJ}]=f_{wind}\times(W_{t}T+T_{t}W)$ $W_{t}T=\frac{\sum_{i}^{n}M_{i}\times CO_{2}eq W_{t}T,i\times LCV_{i}+\sum_{k}^{c}E_{k}\times CO_{2}eq_{electricity,k}}{\sum_{i}^{n fuel}M_{i}\times LCV_{i}\times RWD_{i}+\sum_{k}^{c}E_{k}$

$W_{t}T=\frac{13,700,000,000\times 13.500\times 0.0405+1,600,000,000\times 14.400\times 0.0427}{13,700,000,000\times 0.0405\times 1.0+1,600,000,000\times 0.0427\times 1.0}$

Main			Aux
Fuel Type	HFO		Fuel Type	MDO
Fuel Consumption	13,700	MT per year	Fuel Consumption	1,600	MT per year
Well-to Tank			Well-to Tank
CO₂eq	13.500	gCO₂eq/MJ	CO₂eq	14.400	gCO₂eq/MJ
LCV	0.0405	MJ/gFuel	LCV	0.0427	MJ/gFuel
RWD	1.0		RWD	1.0

$T_{t}W=\frac{\sum_{i}^{n fuel}\sum_{j}^{m engine}M_{i,j}\times\left[\left(1-\frac{1}{100}C_{slip j}\right)\times\left(CO_{2eq,TtW,i,j}\right)+\left(\frac{1}{100}C_{slip j}\times CO_{2 eq TtW,Slip,i,j}\right)\right]}{\sum_{i}^{n fuel}M_{i}\times LCV_{i}\times RWD_{i}+\sum_{k}^{c}E_{k}}$ $T_{t}W=\frac{13,700,000,000\times 3.163+1,600,000,000\times 3.255}{13,700,000,000\times 0.0405\times 1.0+1,600,000,000\times 0.0427\times 1.0}=77.89$

Main			Aux
Fuel Type	HFO		Fuel Type	MDO
Fuel Consumption	13,700	MT per year	Fuel Consumption	1,600	MT per year
CO_2eq WtT	13.500	gCO_2eq/MJ	CO_2eq WtT	14.400	gCO_2eq/MJ
LCV	0.0405	MJ/gFuel	LCV	0.0427	MJ/gFuel
Tank to Wake			Tank to Wake
CO_2eq TtW	3.163	gCO_2eq/gFuel	CO_2eq TtW	3.255	gCO_2eq/gFuel
Cf (CO₂)	3.1140	gCO₂/gFuel	Cf (CO₂)	3.2060	gCO₂/gFuel
Cf (CH₄)	0.00005	gCH₄/gFuel	Cf (CH₄)	0.00005	gCH₄/gFuel
Cf (N₂O)	0.00018	gN₂O/gFuel	Cf (N₂O)	0.00018	gN₂O/gFuel

GWP_CO₂	1
GWP_CH₄	28
GWP_N₂O	265

$f_{wind}=\frac{P_{wind}}{P_{prop}}$

Where P_Wind is the available effective power of the wind-assisted propulsion systems and corresponds to f_eff * P_eff as calculated in accordance with the 2021 guidance on treatment of innovative energy efficiency technologies for calculation and verification of the attained energy efficiency design index (EEDI) and energy efficiency existing ships index (EEXI) (MEPC.1/Circ.896)

P_Prop is the propulsion power of the ship and corresponds to PME as defined in the 2018 guidelines on the method of calculation of the attained EEDI for new ships (IMO resolution MEPC.364(79)) and the 2021 guidelines on the method of calculation of the attained EEXI (IMO resolution MEPC.333(76)). Where shaft motor(s) are installed, P_Prop = PME + P_PTI(i),shaft.

Reward factor for wind-assisted propulsion – WIND (f_wind)	P_wind / P_Prop
0.99	0.05
0.97	0.1
0.95	>= 0.15

Penalties Calculation

Penalties for exceeding the GHG intensity target are calculated according to Article 23(2) and Annex IV of the FuelEU Maritime regulation.

$Penalty=\frac{GHG_{Target}-GHG_{Actual}}{GHG_{Actual}}\times Energy_{per fuel type}\times\frac{2400}{41000}$ $Penalty=\left|\frac{89.34-91.49}{91.49}\right|\times\left(13,700,000,000\times 0.0405+1,600,000,000\times 0.0427\right)\times\frac{2400}{41000}=\euro 860,439$ $Compliance\!balance\left[gCO_{2eq}\right]=\left(GHGIE_{Target}-GHG_{Actual}\right)\times\sum_{i}^{n fuel}M_{i}\times LCV_{i}+\sum_{k}^{c}E_{k}$ $Compliance Balance=\left(89.34-91.49\right)\times 13,700,000,000\times 0.0405+16,000,000,000\times 0.0427=-1,344,899,344$

Input
GHG Target	89.34	gCO_2eq / MJ
GHG Actual	91.49	gCO_2eq / MJ
Fuel Consumption	13,700	HFO mT per year
Fuel Consumption	1,600	MDO mT per year
LCV HFO	0.0405	MJ / gFuel
LCV MDO	0.0427	MJ / gFuel
Shore power E_k	0

Output
Compliance Balance	-1,124,607,500	gCO_2eq
FuelEU Penalty	€857,105.81	€ / year

For RFNBO Subtarget $CB_{RFNBO}\left[MJ\right]=\left(0.02\times\left(\sum_{i}^{n fuel}M_{i}\times LCV_{i}\right)-\left(\sum_{i}^{n RFNBO}M_{i}\times LCV_{i}\right)\right)$

Where

CB_RFNBO = Compliance balance in MJ of RFNBO subtarget referred to in Article 5(3)

= Annual sum of energy used from RFNBO and/or from fuels providing equivalent GHG emissions savings referred to in Article 5

Non-Compliant Port of Call (OPS Penalty): In addition to penalties for GHG intensity non-compliance, ships that fail to use OPS at ports equipped with such facilities are also subject to penalties. The penalty for not using OPS is calculated based on the ship’s total electrical power demand and the total hours of non-compliance.

Example Calculation: Assume a ship with a total electrical power demand of 500 kW did not use OPS for 30 hours while at berth. The penalty would be calculated as follows:

OPS Penalty = € 1.5 × Total Electrical Power Demand × Total number of hours

OPS Penalty = € 1.5 × 500 kW × 30 h = €22,500

AFIR Ports refer to ports designated under the Alternative Fuels Infrastructure Regulation to provide the necessary infrastructure for alternative fuels, including Onshore Power Supply (OPS). These ports are required to install and maintain infrastructure that allows ships to connect to OPS while moored, thereby reducing emissions from ships at berth.

P.S. Please note that penalties for non-compliant port calls (OPS) will be implemented for containerships in 2030.

Additional Factors

Wind-Assisted Propulsion: The reward factor for wind-assisted propulsion is determined based on the effective power of the wind-assisted propulsion systems relative to the ship’s propulsion power.
Determining Mass of Fuel: Mass of fuel M_i is determined based on reporting under Regulation (EU) 2015/757, using the monitoring methodology chosen by the company.
GHG Emission Factors: Default values for WtT and TtW GHG emission factors are contained in Annex II. For fossil fuels, only default values are used unless certified under recognized schemes for biofuels and other alternative fuels.

Who is Responsible for Penalties

The primary responsibility for paying FuelEU penalties lies with the ship’s company. This includes ensuring compliance with all regulatory requirements, such as meeting GHG intensity targets and using Onshore Power Supply (OPS) systems where mandated. The ship’s company is accountable for any shortfalls and associated penalties that arise from non-compliance. While the company can enter into contractual agreements with commercial operators, charterers, or fuel suppliers to share or transfer the liability for penalties, the ultimate responsibility remains with the ship’s company.

Submission of Penalties

Penalties must be submitted to the designated administering authorities of the Member State where the ship is registered or where it operates. These authorities are responsible for enforcing compliance with the FuelEU Maritime Regulation and for collecting penalties from non-compliant ships. The penalties are calculated annually based on the verified data submitted by the ship’s company as part of their compliance report.

Repercussions for Non-Payment of Penalties

Failure to pay the required, has serious repercussions. If penalties are not paid on time, the ship will not receive a valid FuelEU document of compliance. This document is essential for the ship’s legal operation within EU ports and waters. Without this document, the ship may face administrative sanctions, including:

Operational Restrictions: Ships without a valid document of compliance may be restricted from operating in EU ports and waters, impacting their ability to conduct business within the region.
Financial Penalties: Continued non-payment can result in further financial penalties and interest charges, increasing the overall cost burden on the ship’s company.
Reputational Damage: Non-compliance and failure to pay penalties can harm the reputation of the ship’s company, affecting their relationships with clients, partners, and regulatory bodies.

To avoid these significant consequences, it is imperative for ship companies to ensure timely payment of all penalties and to maintain compliance with the FuelEU Maritime Regulation. This not only helps in avoiding financial and operational repercussions but also supports the EU’s broader climate objectives by promoting sustainable and environmentally responsible maritime operations.

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Penalty Calculations under FuelEU Maritime