Impact of the EU ETS and the FuelEU Maritime: Case study for small operators

Small-to-mid-size shipping companies operating several modern feeder vessels now face overlapping carbon regimes: EU ETS which operates as a cap-and-trade system for emissions and drives costs through rising allowance prices; and FuelEU Maritime, which sets absolute greenhouse-gas (GHG) intensity limits on fuel and imposes cascading penalties for non-compliance. Individually, each framework is complex. Together, they demand clarity on the interaction between fuel economics, regulatory costs & penalties, and FuelEU’s flexibility mechanisms that in theory could buffer compliance costs.

Our analysis examines a scenario based on a fleet with three vessels, each a 2,500 TEU (twenty-foot equivalent unit) feeder container ship – the standard of intra-European and short-sea trades e.g. in the Baltic and Mediterranean. Each of three vessels use one type of fuel over the 2025-2029 FuelEU Maritime period: Very Low Sulphur Fuel Oil (VLSFO), biodiesel B30 or biodiesel B100. The example aims to determine what the financial consequences look like for small operators navigating the opening years of EU carbon regulation in shipping, show how pooling mechanics work in practice and which cost savings are possible.

Understanding the framework: FuelEU vs. EU ETS

The FuelEU Maritime is the EU’s primary instrument for decarbonising maritime transport through fuel GHG intensity limits. The EU ETS in turn operates as a cap-and-trade system and drives decarbonisation through rising carbon prices. Together they form the backbone of the EU’s ambitious decarbonisations efforts in the maritime sector (see summary in Table 1 below and our articles on the EU ETS maritime inclusion and the FuelEU Maritime).

Table 1: Comparison EU ETS vs. FuelEU Maritime

Besides the above-mentioned difference, the two regulations also have overlaps. Most importantly they share the THETIS-MRV platform to register emissions. As most shipping companies will have to comply with both regulations at the same time, at least the voyage data, port stay data and energy consumption are largely the same for both regulations.

Methodology and variables

FuelEU measures well-to-wake (WTW) GHG intensity: the total lifecycle emissions per unit of energy consumed onboard, expressed in gCO₂e per megajoule (gCO₂e/MJ). The WTW scope includes emissions from fuel extraction, refining, transport, and combustion – not just what comes out of the smokestack. The 2025-2029 annual target is 89.34 gCO₂e/MJ, a 2% reduction from the 2020 baseline of 91.16 gCO₂e/MJ. Any vessel exceeding this threshold incurs a fixed penalty of €2,400 per tonne of VLSFO-equivalent deficit. Conversely, vessels achieving lower intensity generate compliance surplus, which can be banked forward or pooled across a fleet (see example in Figure 1).

Figure 1: Pooling mechanism of a fleet of three ships, before pooling (left) and after pooling (right) (source: carboneer)

The WTW values for this case study are based on standard value from Intercargo and FuelEU Annex I. Please note that we are calculating with a VLSFO fuel with a higher GHG intensity than the FuelEU assumed threshold of 91,16 gCO₂e/MJ. The value in our case is close the HFO value and we assume that all GHG intensity values include the auxillary engine running on MDO for very vessel and scenario.

At the same time the EU ETS applies a carbon price to the tank-to-wake (TTW) emissions only. In 2026, shipping companies must surrender emission allowances (EUA) for 70% of verified emissions for the year 2025; this coverage increases to 100% from 2027 onwards for e.g. 2026 emissions. EUA prices are market-driven, and for our analysis we assume €80/tonne in 2025, increasing linearly to €100 by 2029. In addition, we also assume a RED conform zero-rating for the biodiesel under the EU ETS.

Case study: Is pooling worth it?

The FuelEU permits vessels to aggregate their compliance balances at the fleet level. Ships within or across companies can combine their annual compliance balances to offset deficits with surpluses. The mechanics are strict: the pool must be registered; the aggregate balance must be non-negative; and no individual ship can worsen (a deficit cannot increase; a surplus cannot flip to a deficit).

Figure 2 illustrates three compliance pathways for a fleet of three identical feeder vessels – one burning VLSFO, one B30 and one B100 – over the period of 2025 and 2029. The difference lies in combination of fuel type and especially pooling strategy.

Figure 2: Results of pooling scenarios on total costs under EU ETS and FuelEU Maritime (source: carboneer)

No pooling: The baseline

When the three feeders operate independently – with no inter-vessel compliance aggregation – each vessel’s compliance balance is calculated separately. The VLSFO vessel incurs its FuelEU deficit; biofuel vessels generate surpluses. But these surpluses cannot offset the VLSFO deficit because there is no contractual or administrative mechanism linking them. In addition, cost due to the purchase and surrender of allowances under the EU ETS occur. The aggregate 5-year costs amount to:

• Fuel cost: €168 million
• FuelEU penalty: €6 million
• EU ETS cost: €30 million
• Total: €204 million

Internal pooling: Aggregating within the fleet

Now we apply internal pooling: The three vessels register as a verified compliance pool. In our example the fleet-level aggregate is non-negative (i.e., total surplus or breakeven), pooling is valid and we assume that the B30 fuelled vessel covers the deficit of the VLSFO vessel with part of its surplus compliance units. While the cost of fuels and the EU ETS remain the same, the FuelEU penalty is eliminated through fleet-level aggregation. This represents a 3 % saving of €6 mil. This is material but not transformative. The fleet has moved compliance responsibility from individual vessels to the fleet level, but it has not yet engaged the external market.

External pooling: Monetising surplus

The third pathway is external pooling: the fleet not only pools internally but also engages the emerging market for compliance surplus units. When a fleet generates surplus compliance units, those surpluses can be sold to third-party pooling administrators or other operators needing to cover deficits. The value of surplus compliance units currently ranges between €200-220 per tonne of CO₂ equivalent.

Figure 2 illustrates the concept: If this pooled fleet sells all aggregated surplus compliance units every year for five years, this effectively creates a revenue of €53 million and thus savings of almost 30% compared to the scenario of no pooling. This highlights the importance of mid- to long term fuel choice in combination with a liquid and well-functioning secondary market for compliance unit surpluses.

Main takeaways

Pooling allows fleet operators to potentially largely eliminate FuelEU penalties. WTW emissions of fuels used will increasingly determine additional costs or even revenues under the FuelEU Maritime Regulation. Also for companies with a smaller number of vessels, pooling strategies will determine whether compliance is a drag on profitability or a managed operational reality.

In an upcoming article we will examine how this plays out in practice by comparing two realistic fleet scenarios: Pool A (all VLSFO, no pooling) vs. Pool B (mixed fuel, strategic pooling).

This article is also published on carboneer. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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