How does EU ETS influence the business cases of e-LNG, Biofuel, and FuelEU Maritime Pooling
Updated: Aug 3
In our previous newsletters, we examined different business cases for compliance with FuelEU Maritime. We specifically focused on biofuel vs pooling and e-LNG. These case studies considered compliance costs under FuelEU Maritime alone. However, for shipping companies, compliance costs also include EU ETS (Emissions Trading System).
Overview of EU ETS
As a reminder, the EU ETS is a significant regulation that puts a price on each tonne of CO2 emitted within its scope. Beginning in 2024, this regulation includes a phase-in period that, as of 2025, covers 70% of CO2 emissions. The key difference between EU ETS and FuelEU Maritime lies in their focus. EU ETS emphasizes tank-to-wake CO2 emissions, while FuelEU prioritizes well-to-wake GHG emissions.
Today's newsletter discusses the influence of EU ETS on previous business cases. We will explore whether and when these cases are viable from a comprehensive regulatory perspective.
The Previous Case Study IV: The Best Compliance Option for FuelEU and EU ETS
Reminder: The Baseline
A sample containership consumes 10,000 tonnes of HFO within the FuelEU scope. As a result of fossil fuel usage, the ship incurs a compliance deficit of 975 t CO2e in 2025, along with €1,547,658 in EU ETS compliance costs (based on an EUA price of €71.00). The operator faces three choices:
Pay the FuelEU Penalty (€2,400 per tonne of VLSFOe or €640 per tonne of CO2e).
Switch to Bio30 (30% biofuel blend) at an additional €209 per tonne compared to VLSFO (ARA price difference, HBE incentivized as of Feb 7).
Purchase surplus from another ship at a price of €250 per tonne of CO2e surplus.
Each method has different cost implications and strategic benefits, as we will outline below.
Option 1: Paying the FuelEU Penalty and EU ETS Costs
Under FuelEU Maritime, ships that fail to comply must pay a penalty of €2,400 per tonne of VLSFOe (equivalent to €640 per tonne CO2e). Although this option is straightforward, it is the most costly. If the vessel remains non-compliant for consecutive years, penalties grow exponentially, leading to a significant financial burden.
FuelEU Penalty: €624,000
EU ETS Costs: €1,547,658 (in 2025)
Total Compliance Costs: €2,171,658
Option 2: Switching to Bio30
Switching to a 30% biofuel blend (Bio30) can help the vessel reduce emissions to achieve compliance with FuelEU Maritime. This change also lowers the EU ETS costs, as the tank-to-wake CO2 emission factor for biofuels under EU ETS is 0. It's important to note that biofuels create a regulatory-compliant pathway by reducing emissions at the source. However, they come at a premium price and may face supply constraints.
Here’s how the numbers break down with Bio30:
FuelEU Compliance Costs: €310,365
EU ETS Costs: €1,478,787 (in 2025)
Total Compliance Costs: €1,789,152
Option 3: Pooling
Pooling allows companies to purchase surplus compliance credits from vessels that have exceeded their requirements. This method achieves compliance for deficit ships at a significantly lower cost. However, pooling does not reduce EU ETS costs, leading to the following total compliance costs:
FuelEU Compliance Costs: €243,750
EU ETS Costs: €1,547,658 (in 2025)
Total Compliance Costs: €1,791,408
Comparing Compliance Costs for FuelEU and EU ETS
When comparing the results from the previous newsletter, it becomes evident that pooling is not significantly cheaper than using biofuel for compliance with both FuelEU Maritime and EU ETS. Taking both regulations into account creates a level playing field and highlights the necessity of integrating all relevant costs into a compliance strategy.
To facilitate your own analysis, we recommend using our free online calculator, which allows you to compare various compliance scenarios tailored to your specific needs.
The Previous Case Study V: Assessing e-LNG in Light of EU ETS and FuelEU Maritime
Our most recent case study explored e-LNG’s viability as a compliance option for FuelEU Maritime and as a general maritime decarbonization strategy. This study emphasized the commercialization benefits provided through FuelEU pooling. The conclusion was clear: e-LNG is often a cheaper alternative to fossil LNG, based on different scenarios involving surplus value estimates.
Estimating the Base Case for Fossil LNG
For vessels using fossil LNG, compliance is determined by fuel consumption and the applicable emission factor, as illustrated below:
Annual fuel consumption: 10,000 tonnes of LNG
Engine type: LNG Diesel (dual fuel slow speed)
Emission factor (Well-to-Wake, fossil LNG): 76.08 gCO2e/MJ
Emission factor (Tank-to-Wake, fossil LNG): 2.75 gCO2e/g
EUA Price: €71.00 (Feb 20th, 2025)
Compliance balance (Surplus): 6,508 t CO2e
Potential surplus earnings (250 €/t CO2e): €1,627,000
EU ETS Costs (no phase-in): €1,952,500
Using conservative estimates, this vessel generates a surplus of 6,508 t CO2e, leading to significant additional revenue. However, it still incurs EU ETS costs totaling €1,952,500.
Analyzing the e-LNG Business Case
What happens if we switch fully to e-LNG? Assuming 100% e-LNG usage, we can evaluate the costs:
Annual e-LNG consumption: 10,000 tonnes
Engine type: LNG Diesel (dual fuel slow speed)
Emission factor (Well-to-Wake, e-LNG): 11.38 gCO2e/MJ
Emission factor (Tank-to-Wake, fossil LNG): 0.00 gCO2e/g (under EU ETS)
EUA Price: €71.00 (Feb 20th, 2025)
Compliance balance (Surplus): 41,070 t CO2e
Potential surplus earnings (250 €/t CO2e): €10,267,500
EU ETS Costs: €0.00
Transforming operations to 100% e-LNG results in increased potential revenue, totaling €10,267,500, alongside zero EU ETS costs. What does this mean for the break-even price for e-LNG?
Baseline LNG price: €905 per tonne (Titan weekly, Feb 14)
Expected e-LNG price: €2,800 per tonne (Supplier estimate)
Break-even price for e-LNG: €2,159.55 per tonne
This price represents an increase compared to the previous cases, highlighting the necessity of considering EU ETS in tandem with FuelEU Maritime.
Sensitivity Analysis: Examining the Surplus Value Impact on e-LNG’s Business Case
This analysis is based on a surplus value of €250/t CO2e. However, the market is dynamic, leading us to evaluate a higher-value scenario at €400/t CO2e.
Potential Surplus Earnings (fossil LNG, 400 €/t CO2e): €2,603,200
Potential Surplus Earnings (e-LNG, 400 €/t CO2e): €16,428,000
Let’s see how these figures impact pricing:
Baseline LNG price: €905 per tonne (Titan weekly, Feb 14)
Expected e-LNG price: €2,800 per tonne (Supplier estimate)
Break-even price for e-LNG: €2,808.12 per tonne
With an adjusted surplus value, the break-even price for e-LNG aligns closely with supplier estimates. This emphasizes the added benefits of including EU ETS costs in evaluating e-LNG's business viability.
If you're interested in purchasing e-LNG, contact us via email: info@bettersea.tech!
Conclusion: Crafting a Robust Compliance Strategy
The results from both case studies shift when considering the impacts of both FuelEU Maritime and EU ETS. This demonstrates the importance of a comprehensive compliance strategy. Analyzing the regulations in isolation can lead to misleading conclusions. Given the volatility of factors like biofuel premium, surplus value, and EUA price, a thorough and ongoing evaluation is essential.
BetterSea’s FuelEU Maritime Compliance Platform offers a streamlined process covering all compliance options, including external pooling and surplus trading. Book a demo below to see how we can help you formulate an optimal compliance strategy tailored to your specific needs.
Stay tuned for more insights on navigating maritime decarbonization compliance in our upcoming newsletters. If you have any questions or need further guidance, feel free to reach out!
Best regards,
The BetterSea Team
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Simplified unit conversion: The analysis assumes an emission reduction for biofuel of 65% compared to 94 g/MJ (as per RED II) and a LCV of 37200. **Surplus value estimated to be 250 €/t CO2e or 400 €/t CO2e (Disclaimer: This is an assumption).
The EU ETS surcharge changes the math a lot, especially since paying the FuelEU penalty gets so expensive. I used Krillion to check how the Bio30 option cut the tank-to-wake CO2 costs, and it seems like the best total choice here despite the higher fuel price.