FuelEU prices raise decarbonisation concerns

With the first FuelEU Maritime reporting year concluding at the end of June, the company said the regulation has successfully established an active compliance market, encouraging shipowners to embrace pooling arrangements, biofuel use and surplus trading instead of relying solely on financial penalties.

However, the sharp decline in surplus prices following the main pooling window has prompted concerns that the regulation’s long-term objectives could be undermined if compliance becomes significantly cheaper than investing in cleaner fuels.

Philippos Ioulianou, managing director of EmissionLink, said: “FuelEU has worked in the sense that it has created a market. Shipowners have engaged with pooling, biofuels and surplus trading. That is positive. But if buying compliance becomes easier and cheaper than using lower-carbon fuels, then the regulation risks becoming an accounting exercise rather than a driver of decarbonisation.”

According to EmissionLink’s market observations, surplus prices discussed at around €175 to €185 per compliance unit during the busiest pre-deadline trading period fell to approximately €120 to €130 after the main pooling window closed. The company believes the decline reflects greater-than-expected surplus availability, supported by long positions, banked surplus and stronger compliance unit generation.

While lower prices may reduce short-term costs for shipowners, EmissionLink argues they could also reduce the commercial incentive to adopt biofuels and other low-carbon alternatives.

“FuelEU was designed to stimulate demand for renewable and low-carbon fuels,” Ioulianou said. “If surplus is abundant and cheap, some operators may simply buy compliance units instead. That meets the rules on paper, but it does not necessarily move the industry closer to fuel transition.”

Looking ahead, EmissionLink believes FuelEU should be viewed as a developing commercial market rather than an annual regulatory deadline. The company is urging regulators to assess whether the current framework strikes the right balance between flexibility and meaningful emissions reductions.

“Cheap compliance may be welcome for shipowners in the short term, but it should not become a substitute for real progress,” concluded Ioulianou. “Those with accurate data, robust contracts and early compliance strategies will be best placed to manage FuelEU as the market continues to evolve.”