Two EU measures now add a carbon cost to every tonne of fuel burnt on voyages to, from and within Europe. This guide explains how the EU ETS and FuelEU Maritime work, how they differ, and how to estimate their effect per tonne of fuel.
Two different instruments
The EU Emissions Trading System is a cap-and-trade scheme. Shipping companies must surrender one allowance for each tonne of CO2 equivalent covered by the rules. The cost therefore depends on how much fuel is burnt, which fuel, and the market price of allowances.
FuelEU Maritime, which applies from 1 January 2025, does not price emissions directly. It sets a limit on the greenhouse gas intensity of the energy a ship uses, measured on a well-to-wake basis in grams of CO2 equivalent per megajoule. Ships that exceed the limit pay a penalty unless they can offset the deficit through banking, borrowing or pooling.
EU ETS: who and what is covered
- Cargo and passenger ships of 5,000 gross tonnage and above since 2024. Offshore ships of 5,000 GT and above join from 2027.
- 100% of emissions on voyages between two EU ports and while in EU ports, including at berth.
- 50% of emissions on voyages that start or end outside the EU.
- CO2 from 2024, with methane and nitrous oxide added from 2026.
The responsible shipping company is the registered owner, or the ISM company where it has formally taken on that responsibility. The company remains liable for surrendering allowances, but it can recover the cost under contract from the party that buys the fuel or controls the ship's operation, which is why charter parties now commonly include ETS clauses.
The phase-in and deadlines
- 40% of verified 2024 emissions, surrendered by 30 September 2025.
- 70% of verified 2025 emissions, surrendered by 30 September 2026.
- 100% of verified emissions from 2026 onwards, so 2026 emissions are surrendered in full in 2027.
A company that fails to surrender enough allowances pays an excess emissions penalty of EUR 100 per tonne of CO2 equivalent, adjusted for inflation, and must still surrender the missing allowances. After two or more consecutive years of non-compliance, a company's ships can be refused entry to EU ports.
Worked example: ETS cost per tonne of fuel
The EU monitoring rules give default CO2 emission factors per tonne of fuel. Heavy fuel oil grades RME to RMK use 3.114 tonnes of CO2 per tonne of fuel, which covers a VLSFO supplied as one of those grades. Marine gas oil grades DMX to DMB use 3.206.
For one tonne of VLSFO burnt in 2026, counting CO2 only:
- On a voyage between two EU ports, or at berth in the EU: 3.114 allowances.
- On a voyage from or to a non-EU port: 50% of 3.114, or 1.557 allowances.
- For comparison, one tonne of MGO on an intra-EU voyage: 3.206 allowances.
Multiply by the allowance price on the day you buy to get the cost per tonne. As a rule of thumb, every EUR 10 on the allowance price adds about EUR 31 per tonne of VLSFO on intra-EU voyages and about EUR 16 per tonne on extra-EU voyages. From 2026 a small additional amount is due for methane and nitrous oxide, which matters most for LNG-fuelled ships because of methane slip.
For fuel burnt in 2025, apply the 70% phase-in factor: 3.114 multiplied by 0.70 gives about 2.18 allowances per tonne on intra-EU voyages.
FuelEU Maritime: targets and scope
FuelEU applies to ships above 5,000 GT carrying passengers or cargo for commercial purposes. It counts 100% of the energy used on voyages within the EEA and at berth in EEA ports, and 50% of the energy used on voyages into or out of the EEA.
The reference value is 91.16 gCO2e per MJ. The limit tightens in steps:
- 2% below the reference from 2025, giving a target of 89.34 gCO2e/MJ until 2029.
- 6% from 2030.
- 14.5% from 2035.
- 31% from 2040.
- 62% from 2045.
- 80% from 2050.
Because the reference value reflects the fleet average in 2020, when ships ran almost entirely on fossil fuel oil, a ship burning only conventional fuels will generally find itself in deficit. Energy from renewable fuels of non-biological origin counts double until the end of 2033, and a 2% sub-target for such fuels applies from 2034 if the Commission finds their share was below 1% in 2031.
FuelEU penalties and flexibility
The penalty is calculated by converting the ship's compliance deficit into an equivalent amount of energy, expressing that energy as tonnes of VLSFO at 41,000 MJ per tonne, and charging EUR 2,400 per tonne. The penalty increases where a ship is in deficit for consecutive periods. A separate penalty applies to non-compliant port calls by container and passenger ships once shore power requirements start in 2030.
- Banking: a surplus can be carried forward to later periods.
- Borrowing: a deficit can be covered by an advance on next period's surplus, repaid with a 10% surcharge.
- Pooling: two or more ships, including ships of different companies, can pool their balances, provided the pool's total is positive and no ship leaves with a larger deficit. The verifier must record the pool by 30 April.
- Timeline: the ship's FuelEU report goes to the verifier by 31 January, and penalties must be paid by 30 June.
What this means when you buy fuel
- Budget the full cost per tonne, not just the bunker price, for every EU-related voyage.
- Keep BDNs, consumption records and fuel data accurate, because they feed both the monitoring reports and the allowance bill.
- When considering biofuel blends, check the sustainability documentation as well as the ISO 8217 specification, since only certified fuels can reduce ETS and FuelEU liabilities.
- Agree ETS and FuelEU cost allocation in charter parties before fixing.
- Decide pooling and fuel strategy early in the year rather than at the reporting deadline.
Atlas Bunkering compares offers per grade across trusted suppliers so that owners can weigh the bunker price alongside its regulatory cost, and recommends independent surveying and accredited laboratory testing on every stem, arranged on request.
Questions and answers
Is EU ETS charged on fuel bunkered or fuel burnt?
On emissions from fuel consumed on covered voyages and in port, as monitored and verified under the EU MRV rules. Where the fuel was bought does not matter.
Who pays for ETS allowances?
The shipping company, meaning the registered owner or the ISM company that has taken on the responsibility. It can recover the cost from a charterer or other party under contract.
Can a ship with a FuelEU surplus help another company's ship?
Yes. Pools can include ships of different companies, provided the combined balance is positive, no ship ends up with a larger deficit and no ship in surplus ends up in deficit.
Sources
- European Commission: FAQ on maritime transport in the EU ETS
- European Commission: Questions and answers on Regulation (EU) 2023/1805 (FuelEU Maritime)
- Commission Delegated Regulation (EU) 2016/2071, MRV emission factors (FAOLEX copy)
- ABS: FuelEU Maritime questions and answers
- Lloyd's Register Class News 06/23: FuelEU Maritime (March 2023)
This guide is general information, not legal or technical advice. Check the current rules and your engine maker's guidance for your vessel.