In spring 2023 the EU finalised a political agreement on FuelEU Maritime (FEUM), arguably the most important shipping-related legislation in its ʻFit for 55ʼ package. The regulation is a welcome step in tackling shippingʼs emissions problem, as the first global regulation to effectively mandate the industry to transition towards low carbon fuels across the next 30 years.
However, the ambition and scope of the regulation still leave huge room for improvement, and more needs to be done to put shipping on a Paris-compliant trajectory. Given the limited ambition of the GHG intensity reduction targets, FEUM green-lights a slow-motion transition away from fossil fuels in shipping, with oil-based fuels and fossil gas still likely to make up the majority of fuel demand until 2045.
This paper models the potential impact of FuelEU Maritime (in conjunction with the EU ETS), by showing how shipping companies might behave across the next 30 years in response to the legislation and future fuel pricing. We find that under the existing regulation, the industry would see a slow transition away from polluting fossil fuels such as LNG, which ships could continue using into the 2050s, towards more sustainable e-fuels.