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Insights Compliance mechanisms: Banking, borrowing and pooling

Compliance mechanisms: Banking, borrowing and pooling

EU ETS & FuelEU Maritime May. 22, 2024
Compliance mechanisms: Banking, borrowing and pooling

To help operators comply with the requirements stated in the regulation, the FuelEU Maritime offers flexibility through banking, borrowing and pooling mechanisms.

Through the banking and borrowing mechanisms in the FuelEU Maritime regulation, shipping companies can bank compliance surplus for, or borrow from the subsequent period, to offset deficits.

What this means is, that if a ship has a compliance surplus on its GHG intensity in a reporting period, the company may bank it to the same ship’s compliance balance for the following reporting period.

On the other hand, if a ship has a compliance deficit on its GHG intensity in a reporting period, the company can borrow an advance compliance surplus of the corresponding amount from the following period.

However, the advance compliance surplus cannot not be borrowed for an amount exceeding more than 2% of the limit multiplied by the ship’s energy consumption. In addition, the advance compliance surplus may not be borrowed for two consecutive periods.

The operator of the ship will have to pay a penalty if a ship that has borrowed an advance compliance surplus is not compliant in the following reporting period.

Pooling of compliance

The pooling mechanism provides shipping companies with flexibility in achieving compliance as it allows verified ships to combine compliance balances by allocating compliance from one ship to another.

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In its QA on Sustainable transport, infrastructure and fuels, the European Commission describes the pooling mechanism as follows:

“Given that special flexibility will be needed for the energy transition in shipping, FuelEU includes specific provisions to help operators comply. Particularly, a voluntary pooling mechanism gives the possibility to operators to pool their compliance balance with one or more other ships allowing to reward “first-movers” while making it possible for ships with less compliance options to continue operating and demonstrate compliance though participation in a pool.”

“A voluntary pooling mechanism gives the possibility to operators to pool their compliance balance with one or more other ships allowing to reward “firstmovers” while making it possible for ships with less compliance options to continue operating and demonstrate compliance though participation in a pool.”

— European Commission

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Compliance pooling for verified ships

Ships that are verified by the same verifying body can pool their compliance balance, even if they are controlled by different companies. This means, that two or more ships from different shipping companies can pool their compliance, if they are verified by the same verifier, as it is up to the verifier to record the pool’s composition and allocation of compliance. A ship can only be included in one pool per reporting period, and the ships must have been compliant in the previous year.

When is a pool valid?

A pool is only valid if the total pooled compliance is positive. That means, if one ship is 120% compliant, and another is only 80% compliant, the first ship can allocate its surplus to the other. The total pooled fleet compliance thus becomes 100%.

In the case one ship is 110% compliant and another is 80% compliant the total pooled fleet compliance becomes 95%, which makes the total pooled compliance negative. 

 

FAQ FuelEU Maritime

  • What is the FuelEU Maritime regulation?

    The FuelEU Maritime regulation aims to promote the decarbonisation of fuels on board ships by setting a limit of GHG intensity of energy used on board and by making the use of onshore power supply mandatory in ports.

  • What to be aware of regarding the FuelEU Maritime?

    Shipping companies need to submit a vessel-specific monitoring plan to verifiers by August 31, 2024. As of January 1, 2025, shipping companies must monitor and record the energy usage at port and during operation for each ship as per the approved plan. Beginning 2026, emission data must be submitted to verifiers by January 31 annually.

  • How is FuelEU Maritime related to EU ETS?

    The Fuel EU Maritime Regulation is a complementary regulation to the EU ETS. The EU ETS provides a regulatory framework for emissions reduction. In parallel, FuelEU Maritime supports the transition to low-carbon and renewable fuels, aligning with the goals of the EU ETS.

  • What are the GHG intensity regulations?

    The regulation sets a limit for the annual average of GHG intensity for fuels used on board ships over 5,000 GT, arriving at or departing from ports under the jurisdiction of EU/EEA Member States.

  • Which GHG’s are covered?

    GHG’s covered are carbon, methane, and nitrous oxide. The GHG intensity of the fuel is calculated on a life cycle basis based on emission factors determined for the Well-to-Tank and Tank-to-Wake parts, respectively.

  • How do you calculate GHG intensity when using biofuel?

    Biofuels that comply with the sustainability and GHG saving criteria in the Annex II of the FuelEU Maritime regulation or the Renewable Energy Directive, can use the default values provided therein or actual values certified under a scheme recognised by the EU. (Biofuels that do not comply with these criteria or are produced from food and feed crops are considered to have the same emission factors as the least favourable fossil fuel pathway for this type of fuel.)

  • What is the FuelEU Maritime penalty?

    If the GHG intensity used on board exceeds the GHG intensity limit for the year in question, a financial penalty will be imposed on the shipping company. Noncompliance with the onshore power supply requirements also imposes a remedial penalty.

  • What happens if penalties are not paid?

    If a ship does not comply with the FuelEU Maritime regulation for two or more consecutive reporting years, the competent authority of the EU/EEA Member State at the port of call can issue an expulsion order to the shipping company. The ship is barred from entering any port in any Member State until the company meets its obligations.

  • What is the "port of call" under the FuelEU Maritime?

    In FuelEU Maritime, "Port of call" means a port for cargo, passenger embarkation, or disembarkation. Excluded are stops for refuelling, supplies, crew relief, dry-dock, repairs, distress, ship-to-ship transfers outside ports, shelter from weather, and containerships in a neighbouring transhipment port.

  • What is Banking, Borrowing, and Pooling?

    FuelEU Maritime offers flexibility through banking, borrowing, and pooling. Ships can store compliance surplus for subsequent periods or borrow from the next period to offset deficits. Pooling allows verified ships under the same verifying body to combine compliance balances for individual ship compliance.

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