Nine In Ten Vessels Used Pooling In First FuelEU Compliance Year

Pooling became the dominant route to compliance under the European Union's marine fuel regulation in its first reporting year, with 92 percent of vessels using the mechanism and only 2 percent relying on borrowing, according to analysis from a Norwegian marine insurer. The remainder either paid the penalty or met the target through liquefied natural gas or other lower-emission energy sources.

The two mechanisms work differently. Pooling allows a vessel with a compliance surplus to transfer it to ships that fall short, so that a group meets the target collectively rather than individually. Borrowing lets an operator defer a deficit into the following year at a 10 percent surcharge, which is a financing arrangement rather than an abatement one. The overwhelming preference for pooling indicates that operators found it cheaper to buy surplus from someone who had over-complied than to pay the penalty or push the problem forward.

The prices confirm that. Compliance surplus traded at an average of around 208 euros per tonne of carbon dioxide equivalent, roughly 240 dollars, against a penalty of 640 euros, about 737 dollars, for conventional low-sulphur fuel oil. Prices held broadly stable through last year before falling to around 170 euros in May, following the pooling deadline at the end of April. A surplus market clearing at less than a third of the penalty is functioning as designed, in the sense that it is finding the cheapest available abatement rather than simply collecting fines.

Meeting the requirement involved an estimated 3.22 million tonnes of carbon dioxide equivalent in reductions against an all-conventional-fuel baseline. Gas is estimated to have delivered around a third of that, with biofuel blends providing the remainder; biodiesel accounted for 68 percent of the renewable and low-carbon energy used, with bio-gas the next largest contributor. A climate policy manager at a Copenhagen research centre said the results showed the regulation working as intended.

That conclusion deserves a qualification. The requirement in this first year was a 2 percent reduction in the greenhouse gas intensity of energy used aboard, rising on a schedule towards 80 percent by 2050. Meeting a 2 percent target largely through biodiesel blending and existing gas tonnage says very little about whether the same mechanisms scale. Pooling depends on somebody holding a surplus, and as the target tightens the pool of over-compliant vessels shrinks. The regulation applies to ships above 5,000 gross tons calling at European ports regardless of flag, so the answer will arrive for the whole world fleet at once.