FuelEU and EU ETS are increasing the pressure for clear responsibility allocation.
The charterer shapes operations while the owner bears regulatory consequences.
Different mechanics and different contractual implications.
Clear charter party language and reliable data interfaces.
The EU Emissions Trading System (ETS) and FuelEU Maritime pursue different objectives with different mechanisms but converge at a common point: the vessel. Under EU ETS, the responsible entity — typically the shipping company as defined by the MRV Regulation — must purchase and surrender EU Allowances (EUAs) for the CO2 emissions of its vessels. The phase-in is gradual: 40 % of verified emissions in 2024, 70 % in 2025 and 100 % from 2026 onwards.
FuelEU Maritime, by contrast, regulates the greenhouse gas intensity of the fuels used. Compliance responsibility lies with the “company” as defined by the ISM Code — which under time charters is frequently the technical manager or owner, whilst the charterer determines the fuel choice. This asymmetry is the core of the problem: whoever chooses the fuel determines the FuelEU balance, but whoever bears compliance responsibility carries the risk of penalties.
EU ETS costs can be calculated relatively directly: fuel consumption multiplied by the emission factor and the EUA price. For FuelEU, the calculation is more complex, as the GHG intensity value of the fuel determines the compliance distance from the target and surpluses (compliance surplus) can be offset between vessels of the same operator — which for chartered vessels requires contractual provisions for this offsetting.
Additionally, voyage logic applies: EU ETS captures emissions on voyages from, to and between EU ports, with attribution limited to 50 % for voyages to or from non-EU ports. FuelEU follows a similar but not identical voyage delineation. For charterers and owners, this means that both regimes must be calculated separately but coordinated contractually.
The BIMCO clauses for EU ETS and FuelEU provide a starting point but do not cover all scenarios. The ETS clause essentially addresses cost allocation: the charterer assumes EUA costs in proportion to fuel consumption during the charter period. The FuelEU clause is more complex, as it must address not only costs but also compliance responsibility and surplus handling.
In practice, three common points of dispute emerge. First: data quality and data access. The owner needs timely consumption data to ensure MRV reporting and ETS compliance. The charterer does not always have an interest in sharing this data unreservedly. Second: the timing of settlement. EUAs must be surrendered annually, but charter periods frequently do not align with the calendar year.
Third: the FuelEU pooling question. An owner operating multiple vessels can offset surpluses and deficits between them. If a chartered vessel generates a compliance surplus because the charterer bunkered higher-quality fuel, the question arises: who owns that surplus? Without contractual provisions, this point becomes a source of conflict.
Under a voyage charter, the situation is relatively straightforward: the owner provides the vessel, bears the fuel costs and thus also the ETS and FuelEU responsibility. Emission costs are incorporated into the freight rate, and the charterer does not directly influence the fuel choice.
Under a time charter, the dynamics shift fundamentally. The charterer determines the route, speed and fuel. The owner, however, bears the regulatory responsibility. If the charterer decides to bunker conventional HFO in a particular port even though VLSFO or biofuel would be available, the owner's FuelEU balance deteriorates. Without contractual safeguards, the owner has limited room for manoeuvre.
This problem intensifies with sub-charters, where the chain of responsibilities grows longer still. A head charterer passes the vessel on, the sub-charterer makes the operational decisions, but regulatory responsibility remains with the owner. Without end-to-end contractual clarity, information gaps and liability risks emerge.
Operators should contractually safeguard three core areas. First: data obligations — timing, format and scope of consumption data that the charterer must provide to the owner. Second: cost allocation — clear formulae for ETS costs (EUA price times consumption times emission factor) and FuelEU penalties, including adjustment mechanisms for price changes.
Third: surplus allocation — who may utilise compliance surpluses, and how are deficits allocated? The BIMCO clauses offer drafting suggestions here, but every charter relationship has particularities that require individual adaptation.
Compliance data disputes are cheaper to prevent than to resolve after a verifier has already rejected a submission. A workable safeguard is a monthly reconciliation cycle built into the charter party: the charterer supplies bunker delivery notes and consumption logs within a fixed number of days after each calendar month, the owner cross-checks these against flow meter data and MRV entries, and any discrepancy above an agreed tolerance is flagged immediately rather than left until the annual EUA surrender or the FuelEU compliance balance is calculated. Waiting for the year-end figures to reveal a data gap leaves no practical time to correct it before the deadline.
A second safeguard is naming the verification method in advance. Flow meter readings and bunker delivery note quantities regularly diverge by a small margin, and if the charter party does not state which source governs, the choice becomes a point of negotiation exactly when the parties are already in dispute. Fixing the method, and a tolerance band around it, removes that argument before it starts.
Finally, an escalation clause should specify what happens when a discrepancy cannot be resolved through reconciliation alone: a defined period for technical review, a named third party if the parties cannot agree, and interim treatment of the disputed emission cost so that neither side withholds payment indefinitely while the underlying question is worked out.
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