February 10, 2025

Beyond the Data - The Case of FuelEU

FuelEU compliance is already proving to be a financial minefield. Many shipowners are realizing that just tracking data isn’t enough—but by the time they do, it might be too late.

The new regulatory regime of the FuelEU has been in force for the first month and change. As a consequence, many owners and charterers have become acquainted with the particulars of the regulation and have faced making decisions on a—perhaps—not fully informed baseline. What seemed at first glance to be a straightforward exercise in data tracking and verification has, in practice, presented significant strategic and financial implications for those navigating compliance.

A common misperception persists: if you track the data, you are covered. But tracking and verifying your emissions is only the minimum viable effort—akin to marking your exam answers without attempting to improve your score. The real game lies in the strategic and financial choices that follow from the data, and failing to act on this early enough in the compliance cycle risks unnecessary exposure to costs.

The Three Compliance Pathways: Not All Are Equal

FuelEU compliance is, at its core, a cost-minimization exercise. There are three broad approaches:

• Pay the penalty.
• Adopt lower-carbon fuels such as biofuels.
• Utilize flexibility mechanisms, such as pooling and trading compliance surpluses.

The first option—paying the penalty—has already been shown to be the most expensive. A study by DNV suggests that, for a standard vessel operating under FuelEU rules, accumulating penalties over time could result in costs exponentially higher than proactive compliance measures. Simply put: if the plan is to wait and pay, it will be the most painful plan.

The second option—fuel switching—is more viable but not without complexity. Biofuel availability, pricing fluctuations, and certification requirements make this a route that requires more than a simple procurement decision. The economic case is compelling: DNV estimates that using a blend of LNG and bio-LNG, for example, could yield savings of up to 16% over a vessel’s operational lifetime compared to using bio-MGO. But unless an operator has secured favorable supply contracts and ensured fleet adaptability, this option comes with uncertainty.

The third and often overlooked path—leveraging FuelEU’s compliance flexibility—is where the real advantage lies. The ability to pool compliance across fleets or trade surplus compliance between vessels introduces an arbitrage opportunity. Some vessels will naturally outperform their compliance obligations, while others will struggle to meet them. Recognizing this early allows for proactive trading of compliance credits, reducing overall costs. However, this requires foresight and a structured process. If operators treat compliance trading as a last-minute fix, they may find themselves in a market where surplus credits have become expensive or unavailable.

Process, Not Just Tracking

The risk of a ‘data-only’ approach is that it leaves operators with a single, high-risk bet: that by the time verification rolls around, cheap compliance credits will be available. That is a gamble, not a strategy.

A robust FuelEU approach means integrating compliance into daily operational decision-making. Tracking data is one thing; structuring a process to use that data for proactive decision-making is another.

Smart operators will have already:

• Mapped out and projected compliance exposure for their fleets.
• Set internal targets.
• Created decision trees for fuel procurement and credit trading.
• Evaluated long-term fuel procurement agreements to hedge against volatility.

They will not be waiting until year-end verification to understand their compliance position—they will have actively shaped it.

Beyond Compliance: The Business Case

The true winners in FuelEU compliance will not just be those who manage to stay within the regulatory threshold, but those who turn compliance into a business advantage.

• As compliance costs become a defining factor in Voyage Economics, those with clear, cost-effective strategies will be able to leverage their position to secure premium charters and longer-term contracts.
• In contrast, those who treat FuelEU as a box-ticking exercise will find themselves subject to high compliance costs with little room for maneuvering.
• Companies that proactively manage compliance may benefit from preferential access to cargoes, particularly from shippers with strict ESG policies.

Moreover, proactive compliance can translate into operational efficiencies and reputational benefits. Charterers and cargo owners are increasingly looking to work with operators who demonstrate sustainable practices. A fleet optimized for FuelEU compliance can position itself as a preferred partner, opening up opportunities for premium charter rates and long-term collaborations with environmentally conscious stakeholders.

Furthermore, some companies are going beyond regulatory compliance and turning FuelEU into a competitive advantage. By exceeding compliance targets, operators can future-proof their fleets against tightening regulations, potentially gaining access to preferential routes or collaborations with first movers in green shipping corridors. The ability to present a clear decarbonization roadmap can help companies attract institutional investors and stakeholders who prioritize sustainability.

At its core, FuelEU is not a documentation challenge—it is a financial parameter and strategic challenge. Owners and charterers who recognize this shift early will be the ones optimizing their bottom line, while those who see it as a simple reporting exercise may find themselves paying for that misunderstanding in years to come.