Borrowing under FuelEU Maritime: why it is not a safety net when pooling fails

Borrowing under FuelEU Maritime is often described in market discussions as a convenient fallback option. The narrative is simple: if a pool does not work out or surplus cannot be sourced at an acceptable price, the vessel can simply borrow compliance from the following year. This narrative is misleading.

Borrowing is not designed as a universal safety net, and in many practical situations it cannot even cover the deficit of a single conventional vessel. In addition, the regulatory constraints surrounding borrowing make it largely incompatible with many of the scenarios where market participants claim it could be used as a backup. To understand why, it is worth looking at the mechanics in more detail.

The structural limitations of borrowing under FuelEU Maritime

Under FuelEU Maritime, borrowing allows a vessel to temporarily cover a compliance deficit by using part of its future compliance capacity. The borrowed amount must be repaid in the following reporting period with a 10 % increase. However, the Regulation imposes several limitations:

Borrowing may only occur if the borrowed amount does not exceed 2 % of the applicable GHG intensity target multiplied by the vessel’s total energy consumption.

In addition, borrowing must cover the entire compliance deficit. Partial borrowing is not permitted.

Borrowing also cannot take place in two consecutive reporting periods and cannot occur simultaneously with pooling in the same reporting period.

These restrictions already limit the practical usability of borrowing, but when applying the formula to actual vessels the real limitations surface.

Case study: a conventional HFO vessel

Consider a vessel that consumes 10,000 t of HFO within the FuelEU scope in 2025. The resulting compliance data is:

• Compliance balance: – 975 t CO2e

• Penalty: 622,088 EUR

• GHG intensity: 91.74420 g CO2e/MJ

If the shipping company considers borrowing instead of pooling or paying the penalty, the first question is whether the vessel is even eligible to borrow enough compliance to cover its deficit. The maximum borrowing allowance is calculated as follows:

The 2025 GHG intensity target is 89.33680 g CO2e/MJ. Two percent of this target equals 1.78674 g CO2e/MJ.

The vessel’s energy consumption equals:

10,000 t HFO × 0.0405 MJ/g = 405,000,000 MJ

Multiplying the two values gives the maximum borrowing allowance:

405,000,000 MJ × 1.78674 g CO₂e/MJ = 724 t CO2e

This amount is insufficient to cover the vessel’s compliance deficit of 975 t CO2e. In other words, borrowing is not available at all in this scenario. The vessel must either join a compliant pool or pay the penalty.

More broadly, any vessel with a GHG intensity above 91.12354 g CO₂e/MJ will exceed the borrowing threshold and therefore cannot rely on borrowing to eliminate its deficit. A purely HFO-fuelled vessel will therefore not qualify.

For vessels burning a mix of MDO and HFO, the result will depend on the exact fuel ratio, but many conventional trading patterns will still fall outside the borrowing envelope.

Borrowing does not solve FuelEU Maritime pooling failures

The constraints of borrowing become particularly important in the context of pooling under FuelEU Maritime. Some market participants currently promote borrowing as a fallback option if a pool cannot be finalised or if surplus allocation fails. In practice, this argument rests on two possible interpretations.

The first interpretation is that borrowing could be used together with pooling to close any remaining deficit. This is explicitly prohibited by the Regulation. Borrowing and pooling cannot occur simultaneously within the same reporting period.

The second interpretation is that vessels could be removed from a pool if the pool fails, allowing those vessels to borrow individually instead. This assumption is equally problematic. First, as the case study demonstrates, many conventional vessels will simply not have sufficient borrowing capacity to eliminate their deficit. Second, borrowing requires that the entire deficit be covered. If the borrowing allowance is insufficient, the vessel cannot borrow at all. Third, borrowing creates a larger deficit in the following year, as the borrowed amount must be repaid with a 10 % increase. For vessels already struggling to meet the GHG intensity target, this can compound compliance challenges rather than solve them and further requires the shipping company to rely on the seller's ability to source/generate surplus in the subsequent year.

Finally, borrowing cannot be used in two consecutive reporting periods, which means that a vessel relying on borrowing once loses that flexibility in the following year entirely.

Borrowing is a narrow mechanism, not a safety net

Borrowing exists to smooth small, temporary deviations, not to absorb significant compliance deficits. In many real-world cases, particularly for vessels running largely on HFO, the mathematics alone make borrowing unavailable. Even where borrowing is technically possible, the repayment obligation and the prohibition on consecutive borrowing periods limit its usefulness and the compliance options in the future.

For this reason, borrowing should not be treated as a safety net when pooling strategies fail. The mechanism is simply too constrained, both mathematically and legally, to serve that function.

The practical implication for shipping companies is straightforward: pooling arrangements must stand on their own merits. Borrowing cannot be assumed to rescue a poorly structured pool or compensate for insufficient surplus availability.

Looking for well-structured, transparent, legally sound, and low risk pools? BetterSea's FuelEU Maritime Platform transparently connects you to pool partners. Master FuelEU pooling with reduced risks and the transparency you need.

Best regards,

The BetterSea Team

Contact Us: info@bettersea.tech

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