“LNG-fuelled ships are exploiting loopholes in Europe’s FuelEU Maritime and EU ETS rules", says Alibra Shipping. Credits and penalties cancel out, undermining decarbonisation efforts. Alibra warns this makes carbon taxes ineffective, allowing non-compliant vessels to avoid penalties and bank surplus credits.
Alibra Shipping examines loopholes in European decarbonisation regimes
Alibra Shipping believes LNG-fuelled vessels are highlighting loopholes in Europe’s decarbonisation measures for shipping. Competing systems of credits and penalties are cancelling each other out.
In a research note, we examined the effects of the FuelEU Maritime regulation and the European Union Emissions Trading System (EU ETS), as there has been much criticism and questions asked about how effective they are.
FuelEU Maritime came into full force on 1 January this year. It sets maximum limits for the yearly average greenhouse gas intensity of the energy used by ships above 5,000 gt calling at European ports, regardless of their flag.
The EU ETS started its phase-in period for shipping in 2024 and continues to evolve with a gradual increase in scope, with full application expected in 2027.
Alibra has commented that “…there is a fatal flaw in the way they interact together, cancelling out any environmental benefits due to a lack of joined-up thinking.”.
Alibra have explained that ships burning LNG as their main fuel need more gas to travel the same distance as a diesel or fuel-oil powered vessel, because of the lower energy density. This requires larger fuel tanks and potentially more frequent refuelling stops.
Further, LNG, by default, comes in below the FuelEU maximum [greenhouse gas] emission per KJ, however much fuel a ship burns, and they will receive ‘credit’ for this.
For ships that come in over this, there is a penalty.
Banking surpluses
Alibra Shipping have relayed that LNG-fuelled vessels can “sell” credit to another non-compliant vessel, ensuring this ship is not penalised, “making the FuelEU regulation ineffective too”.
An LNG ship could bank all compliance surplus until 2039 and then use this to extend its compliance until 2046. Ships could route away from the EU, resulting in a loss of revenue from allowances, as well as carbon leakage.
By Gary Dixon (London)
(Originally published at Tradewindsnews.com – 24 April 2025)
