Costs from bunker fuel and GHG regulations rise sharply over the next years for all shipping routes. Intra-EU voyages face the steepest increases, up to triple the cost by 2033, mainly due to the EU ETS. The regulations gives financial incentives for emission reductions and a fuel transition.

Introduction

On 11 April, the International Maritime Organization (IMO) agreed on a Net-zero Framework that combines emission intensity limits with a carbon pricing element. For ships sailing to and from European ports this comes on top of EU regulations that are already in place to regulate greenhouse gas emissions. The main elements are outlined in our analysis “IMO agree fuel standard and global carbon pricing scheme for shipping“.

The Net-zero Framework is expected to be formally adopted in October 2025, with many of the finer details of the regulation still to be settled. But there are some take-aways that can shed light on how the new Framework will add to the maritime sector’s bunker fuel costs. More specifically, what level of additional costs can shipping companies expect to face from greenhouse gas regulations in the coming years?

Two fuel intensity regulations: Same idea but different targets, fees and flexibility.

Given that the Net-zero Framework is adopted later this year, ships will be required to comply with a global fuel standard. Ships need to reduce their greenhouse gas fuel intensity (GFI), measured in grams of CO2e per MJ, similar to the Fuel EU Maritime regulation.

Fuel EU Maritime: The regulation has been fully in effect since January 2025. It applies to all energy used during voyages and port calls within the EU (or EEA), as well as 50% of the energy used on voyages entering or leaving the EU (or EEA). The FuelEU Maritime intensity limit decrease in 5-year increments to 2050, see Figure 1. To provide flexibility, shipping companies are allowed to establish compliance pools, enabling groups of ships to meet requirements collectively and transfer surplus or deficits between ships. The penalty for non-compliance in the FuelEU Maritime is €2400/ton CO2e.

IMOs Net-zero Framework: The framework plan to be operative from 2028, and has a global scope. The IMO has a two-tiered target, a Direct Compliance target and a Base target. Ships with a GHG emission intensity above the Direct Compliance target must acquire Remedial Units (RUs) at $100/ton CO2e, called Tier 1 compliance. For emissions above the Base target ships must purchase Tier 2 Remedial Units at $380/ton. Alternatively, for Tier 2 compliance, ships can purchase Surplus Units (SUs). Surplus Units are issued to ships that have emissions below the Direct Compliance targets and can be banked for up to two years. The IMO Framework has targets from 2028-2035, see figure 1. Before 2032, new targets from 2036-2040 must be set.

Despite starting later, the Net-zero Framework intensity target decreases faster than the FuelEU Maritime target and is thus more ambitious. However, it is not a straightforward comparison as penalties for under-compliance are different, and the Net-zero Framework targets post 2035 are not yet set.

Hence, ships can become compliant with FuelEU Maritime while simultaneously under-comply with the IMO framework. As can be observed in the orders of new builds of ships, ships running on liquified natural gas (LNG) have become more common. One practical implication of the difference between the targets is that many natural gas fuelled ships that will be below the GHG intensity of the FuelEU Maritime up to 2030, quickly will have a deficit with the Tier 2 target, and soon also the Tier 1 target.

The EU Commission will examine to align regulations

In the event of the International Maritime Organization (IMO) adopting  “a global market-based measure to reduce greenhouse gas emissions from maritime transport” or“a global GHG fuel standard or global GHG intensity limits for the energy used on board by ships” the EU ETS directive and the Fuel EU Maritime regulation describes actions to be taken by the European Commission.

When the IMO formally adopts this Framework, the European Commission will examine the ambition of the global measure in light of the objectives of the Paris Agreement. The European Commission shall also examine any issue related to the possible articulation or alignment of the Regulation with that global measure. It mentions the need to avoid duplicating regulations for maritime transport at Union and international level.

Both the Fuel EU regulation and the EU ETS directive state that the report may be accompanied by a legislative proposal to amend the regulations.

The Net-zero Framework will become a global GHG fuel intensity for ships, and the Framework is similar to the Fuel EU Maritime regulation, although there are some differences as mentioned before.

The EU ETS differs from the fuel intensity regulations as it puts a price on all emissions from the ship. The EU ETS focuses on reducing all direct emissions, for example operational measures like slow steaming, while the FuelEU Maritime and the Net-zero Framework incentivise a transition to lower intensity fuels.

Doubling or even tripling a ships fuel bill

Shipping companies will be faced with additional costs after recent IMO meeting. To get an understanding of how the regulations add to the fuel bill of ships, figure 2 show how the costs add up under different scenarios. We calculate the compliance and bunker cost for a containership designed to carry 3,000 twenty-foot equivalent unit containers (3,000 TEU). This is representative for the shipping industry as its fuel consumption per nautical mile, based on IMO data, closely aligns with the average across various vessel types and sizes.

In this case we have chosen a voyage of 1800 nautical miles, but three different routes. One between two EU ports, for example Rotterdam to Valencia, one between an EU port to a non-EU-port, and finally two ports outside the EU, which could for example be Busan to Manila.

For each example route, the stack to the left shows the total cost in 2028, while the stack to the right shows the cost in 2033. This is to include the increase ambition to both the FuelEU Maritime regulation, and the IMO Net-zero Framework.

Fuel cost (black bars in figure 2): All voyages are made with very low sulphur oil (VLFSO) as bunker fuel, consuming around 354 tons of fuel. The bunker fuel cost changes depending on the location of bunkering and the year, the cheapest being outside EU in 2028 ($550/t) to the most expensive inside EU in 2033 ($640/t).

EU ETS cost (grey bars): For comparison, no efficiency gains are assumed between 2028 and 2033. All voyages therefore have the same direct emissions, around 1100 tCO2e. This is a simplification to show the cost implications of the regulations. With rising costs, ships will have incentives both to undertake operational and technical measures to reduce their emissions and GHG intensity. Using Veyt’s long term price forecast for the EU ETS (€171 for 2028, and €271 in 2033) in this scenario shows that the EU ETS cost could become larger than the fuel cost for intra-EU voyages, and almost a third of the total cost for EU to Non-EU voyages in 2033.

Fuel EU costs (peach coloured bars): In this scenario, we have used the penalty cost of €2400/t for failing to comply with the Fuel EU regulation. As mentioned earlier, ships can pool their obligation and hence transfer surplus at a lower cost than the penalty. While the FuelEU Maritime generate less costs than the EU ETS and the Net-Zero Framework in this scenario,please note the regulation will have more teeth after 2035 when the target tightens substantially (as shown in Figure 1).

Net-zero Framework (Tier1 in dark green, Tier2 in light green): Since the GHG intensity of VLSFO is higher than the base target the cost of buying Remedial Units for Tier1 compliance is constant over the scenarios. If, the fuel is unchanged as assumed, Tier2 compliance cost increases significantly in 2033 with the target becoming increasingly tighter.

Conclusion

These scenarios clearly shows that how the total costs of bunker fuel and regulations increase substantially from 2028 to 2033 for all three routes. Figure 2 aggregate the cost of all GHG regulations, but as mentioned above the EU may make legislative changes following an IMO adoption of a Net-zero Framework.

Including all the regulations, costs increase significantly for ships sailing Intra-EU, with the EU ETS cost matching the bunker cost in 2028, and all GHG regulations could triple the cost by 2033. For voyages between the EU and a non-EU port the impact will be lower, but still an additional cost of 140% to the bunker fuel cost.

A voyage outside the EU is least impacted, which is to be expected given that they are not exposed to EU regulations, but the overall cost still increases by a third in 2033.

Overall, the scenarios illustrate the incentive that comes from the added costs the EU ETS and the fuel intensity regulations gives to reduce emissions and transition to greener fuels.