Most emissions regulations in shipping work by counting total output. The EU ETS charges a price for every tonne of CO₂ a ship produces. The UK ETS does the same for vessels calling at British ports. Both systems ask the same question: how much did you emit?
FuelEU Maritime asks a different question: how carbon-intensive was the fuel you used?
The regulation, which took effect on January 1, 2025, sets a declining limit on the average greenhouse gas intensity of the energy used on board any ship above 5,000 GT calling at EU or EEA ports. The metric is grams of CO₂ equivalent per megajoule (gCO₂e/MJ), measured on a well-to-wake basis — meaning it accounts for the full lifecycle of the fuel, from extraction or cultivation through production, transport, and finally combustion on board.
The 2020 baseline is 91.16 gCO₂e/MJ. That number represents the fleet-average GHG intensity of marine fuels as they were used across the industry five years ago. From that baseline, FuelEU requires reductions on a fixed schedule: 2% by 2025, 6% by 2030, 14.5% by 2035, 31% by 2040, 62% by 2045, and 80% by 2050.
The first target — a 2% reduction from the 2020 baseline — meant that any ship operating in EU waters in 2025 needed to achieve a GHG intensity at or below approximately 89.34 gCO₂e/MJ. Standard VLSFO carries a default well-to-wake emission factor of approximately 91.16 gCO₂e/MJ under FuelEU Annex II, sitting close to the threshold. For most conventional fuels used in commercial shipping today, the 2% target was achievable without changing fuel type. The first year was, by design, an onboarding year — a regulatory mechanism meant to establish monitoring, verification, and reporting infrastructure before the targets begin to bite.
How the first cycle actually worked
The first compliance cycle ran from January 1 to December 31, 2025. What happened afterward — the verification, flexibility declarations, and penalty phase — played out across the first half of 2026, culminating in a June 30 deadline that has just passed.
The timeline, compressed: ships monitored their fuel use and emissions throughout 2025 according to an approved monitoring plan. By January 31, 2026, the ship's ISM company submitted a FuelEU report to an accredited verifier. By March 31, the verifier completed its assessment and recorded the results — including the ship's initial compliance balance — in the EU's THETIS-MRV database. By April 30, the shipping company declared whether it intended to use any flexibility mechanism: banking surplus for the next year, borrowing from the next year's allowance (with a 10% surcharge), or pooling its balance with other ships under the same ISM company.
If, after all mechanisms were applied, a ship still had a negative compliance balance, the administering EU member state calculated the penalty. The penalty rate is fixed: €2,400 per tonne of VLSFO-equivalent energy in deficit, which translates to approximately €640 per tonne of CO₂ equivalent. Payment was due by June 30, 2026 — the same deadline by which every ship in scope needed a valid FuelEU Document of Compliance on board.
That deadline has now passed. The first cycle is complete.
Why 2% was easy (and why 6% will not be)
The 2025 target of 2% below the 2020 baseline was widely described by industry analysts as achievable with conventional fossil fuels. Standard VLSFO has a default well-to-wake emission factor of approximately 91.16 gCO₂e/MJ under FuelEU Annex II — essentially equal to the 2020 baseline itself. Marine gasoil (MGO) sits at a similar level. LNG, which has lower tank-to-wake CO₂ emissions, carries a well-to-wake GHG intensity that varies significantly depending on engine type — from roughly 75 gCO₂e/MJ for high-pressure diesel-cycle engines with minimal methane slip, to over 90 gCO₂e/MJ for low-pressure Otto-cycle engines where uncombusted methane escapes. The methane slip question is what makes LNG's compliance value uncertain under FuelEU's well-to-wake accounting.
For most ships burning conventional fuels, the 2% target was met without switching to biofuels, without blending, and without significant operational changes. The target was designed as a calibration year — to test the monitoring and verification infrastructure, not to force fuel transitions.
The 2030 target changes the arithmetic. A 6% reduction from the 2020 baseline means a maximum GHG intensity of approximately 85.69 gCO₂e/MJ. That is below what any conventional marine fossil fuel can achieve on its own. Meeting 6% will require one of three things: blending biofuels (typically FAME or HVO at 20-30% ratios), switching to LNG with high-pressure injection to minimise methane slip, or purchasing compliance surplus through pooling from ships that have already made the transition.
By 2035, the target drops to 14.5% (77.9 gCO₂e/MJ), which effectively requires significant alternative fuel adoption — methanol, ammonia, or high-ratio biofuel blends. By 2050, at 80% (18.2 gCO₂e/MJ), only synthetic or fully renewable fuels can comply.
The trajectory is not linear. It accelerates. The first five years are gentle. The next five are not.
Pooling: the compliance strategy that actually mattered
The most consequential feature of FuelEU Maritime's first year was not the GHG intensity target itself. It was pooling.
Under FuelEU, ships managed by the same ISM company can pool their compliance balances. A vessel that over-complies — because it burns LNG with minimal methane slip, uses biofuel blends, or has wind-assisted propulsion installed — generates a surplus. That surplus can be transferred to another vessel under the same ISM company that under-complies, making both vessels compliant without either one changing its fuel.
In the first year, pooling emerged as the dominant compliance strategy. Industry platforms reported pooling prices in the range of €200-300 per tonne of CO₂ equivalent surplus — roughly one-third to one-half of the €640/tCO₂e penalty rate. For a shipping company operating a mixed fleet — some vessels on LNG, most on VLSFO — the economics were straightforward: over-comply on the LNG vessels, pool the surplus to cover the conventional ones, and avoid both the penalty and the cost of biofuel procurement.
The pooling market is still developing. Pricing is not yet transparent or standardised. Bilateral arrangements within the same ISM company dominate — cross-company pooling is not permitted under the current regulation. But the direction is clear: FuelEU has created a compliance commodity — measured in tonnes of CO₂ equivalent surplus — that can be traded within a fleet. As targets tighten toward 2030, the value of that surplus will rise, and the commercial incentive to invest in lower-carbon tonnage will compound.
Three regulations, one ship, different meters
A vessel calling at both Rotterdam and Felixstowe on the same voyage in July 2026 now operates under three separate carbon-related regulatory systems simultaneously.
EU ETS charges for total CO₂ equivalent emissions — 50% of international voyage emissions plus 100% of intra-EU and in-port emissions, fully phased in as of 2026 with CO₂, methane, and nitrous oxide all included. The metric is tonnes of CO₂e. The currency is EU Allowances (EUAs), trading around €78-82 during early July 2026.
UK ETS charges for in-port and domestic voyage emissions at UK ports, with UKAs trading around £48-52. International voyage coverage is proposed for 2028.
FuelEU Maritime does not charge for emissions at all. It sets a maximum GHG intensity for the fuel used, measured in gCO₂e/MJ on a well-to-wake basis. Non-compliance produces a penalty, but the system is designed around intensity reduction, not emissions pricing.
The three systems overlap but do not interact. A ship cannot offset its EU ETS liability with FuelEU surplus. A ship cannot use UK ETS allowances to satisfy FuelEU requirements. Each system runs its own meter, on its own clock, through its own registry. The compliance workload for an operator trading between UK and EU ports is not one system — it is three, with different units, different deadlines, and different flexibility mechanisms.
This is not a transitional arrangement. It is the emerging permanent architecture of maritime carbon regulation.
What the first year revealed
The first FuelEU compliance cycle confirmed several things that the regulation's designers expected, and one thing they may not have.
The monitoring infrastructure works. THETIS-MRV handled the data. Verifiers completed assessments. Documents of Compliance were issued. The administrative machinery of a new regulation — always the highest-risk phase — functioned.
The 2% target did not change behaviour. Ships burned the same fuels they would have burned without FuelEU. The target was met by the existing fleet without adjustment. This was by design, but it also means the regulation produced no measurable emissions reduction in its first year. The reduction came from the target being set below what the fleet was already doing.
The pooling market formed faster than expected. Within months of the first verification cycle, compliance platforms were quoting surplus prices, matching buyers and sellers within ISM companies, and developing standardised pooling agreements. BIMCO published model charter party clauses — ETSA-Voy and ETSA-TC, with updates in 2024 — that address FuelEU cost allocation. The commercial infrastructure is keeping pace with the regulatory framework.
The thing the designers may not have expected: the emerging consensus that paying the penalty — at approximately €640 per tonne of CO₂e — may be economically rational for some operators in some years, particularly when biofuel premiums spike or pooling supply is thin. The penalty is fixed. The cost of compliance is not. In years where compliance costs exceed the penalty, some operators will choose to pay. The regulation allows this. Whether the penalty rate is high enough to prevent it from becoming the default strategy is a question the Commission will revisit.
What comes next
FuelEU Maritime's first year was a dress rehearsal. The regulation is now live, the infrastructure is proven, and the targets begin to tighten.
2030 is the first real test. The 6% target will require fuel changes — biofuel blending, LNG adoption with controlled methane slip, or aggressive pooling — that the 2% target did not. Operators who have not begun planning for 2030 compliance are already late.
2030 also brings the onshore power supply (OPS) mandate. Container ships and passenger vessels calling at major TEN-T ports across the EU will be required to connect to shore power while at berth for stays exceeding two hours, eliminating auxiliary engine emissions during port stays. From 2035, the requirement extends to all EU ports where OPS infrastructure is available. The infrastructure requirements — both on the ship side and the port side — are substantial, and many ports are not yet ready.
The interaction between FuelEU, EU ETS, and the IMO's emerging Net-Zero Framework — which is expected to introduce its own well-to-wake GHG intensity metric — will determine whether the three systems converge or continue to run in parallel. If they converge, compliance simplifies. If they do not, the three-meter problem becomes permanent.
The first year proved the system works. The next five years will prove whether it changes anything.
Sources
- European Commission — FuelEU Maritime Regulation (EU) 2023/1805 and associated implementing regulations
- DNV — FuelEU Maritime regulatory guidance and pool verification framework (2025-2026)
- Lloyd's Register — FuelEU compliance timetable and OPS requirements (2026)
- OceanScore — FuelEU pooling market analysis and compliance cost comparison (2025-2026)