The two most important carbon-compliance regimes now affecting commercial shipping in Europe are the EU Emissions Trading System for maritime transport and FuelEU Maritime. They are related, but they do different legal work. The EU ETS puts a carbon price on emissions by requiring the surrender of allowances. FuelEU Maritime, by contrast, sets a declining greenhouse-gas intensity standard for the energy used on board and adds a separate at-berth clean-power obligation for certain ship types. The European Commission’s own guidance describes them as complementary frameworks: one is a cap-and-trade pricing system, the other is a technology-neutral fuel standard based on lifecycle emissions.
For shipowners and charterers, that distinction is not academic. It affects who bears cost, who controls compliance, what data must be collected, which contractual clauses are needed, and how exposure is managed over the life of the charter. A company can be fully compliant under one regime and still be in breach of the other. That is why EU ETS and FuelEU Maritime compliance strategies for shipowners and charterers now sit at the center of shipping contract drafting, voyage planning, bunker procurement, emissions reporting, and dispute prevention.
Why the Two Regimes Must Be Read Together
The Commission states that the maritime EU ETS has applied since January 2024 to large ships of 5,000 gross tonnage and above entering EU ports, regardless of flag. It covers 100% of emissions between two EU ports and while ships are in EU ports, and 50% of emissions from voyages beginning or ending outside the EU. It currently covers CO2, and from 2026 it also covers CH4 and N2O. FuelEU Maritime, meanwhile, applies to commercial ships above 5,000 gross tonnes carrying passengers or cargo, regardless of flag, and for scope purposes it captures 100% of energy used on intra-EU voyages, 50% of energy used on voyages between an EU port and a third-country port, and 100% of energy used at berth in EU/EEA ports.
This means the same voyage can generate two separate compliance consequences at once. Under ETS, the issue is how many allowances must be surrendered for the covered emissions. Under FuelEU, the issue is whether the ship’s annual energy mix achieves the required GHG intensity and, where relevant, whether the ship complied with at-berth clean-power obligations. The Commission explicitly says the two systems are complementary and designed to address two different decarbonisation levers: carbon pricing and low-GHG fuel uptake.
In practical legal terms, that creates a new type of maritime compliance problem. Traditional charterparty structures were built around freight, bunkers, speed, performance, off-hire, and ordinary regulatory compliance. They were not built for a world in which one regime monetizes emissions and another regulates lifecycle fuel intensity through annual reporting, verification, penalties, and flexibility mechanisms such as pooling and borrowing. The result is that parties now need contract language that maps operational control to regulatory exposure more precisely than before.
The EU ETS: Core Legal Duties
Under the Commission’s shipping ETS guidance, shipping companies must purchase and surrender allowances corresponding to the covered emissions from their fleet. To ease transition, the phase-in works as follows: in 2025, companies surrender allowances for 40% of emissions reported for 2024; in 2026, for 70% of emissions reported for 2025; and from 2027 onward, for 100% of reported emissions. The Commission also notes that the first surrender deadline fell in September 2025 for 2024 emissions.
The identity of the regulated entity is equally important. BIMCO’s official ETS guidance explains that the party responsible for surrendering allowances is the “shipping company”, which the directive defines as the shipowner or another organization or person, such as a manager or bareboat charterer, that has assumed responsibility for the operation of the ship and taken over all ISM Code duties and responsibilities. BIMCO also notes that where an ISM manager has assumed that role, enforcement action by Member States will generally target that responsible entity.
That legal structure immediately raises a charterparty problem. The regulated entity may be the owner, a manager, or another ISM-responsible party, but the commercial driver of emissions may be someone else. BIMCO’s ETS guidance highlights exactly this tension. In the voyage context, BIMCO notes that the directive’s reference to the “operation of the ship” includes determining the cargo carried and/or the route and speed of the ship, but also warns that owners cannot safely assume automatic reimbursement from charterers without express contract language. In the time-charter context, BIMCO likewise recommends a clause because legal reimbursement pathways absent a clause are uncertain and may depend on national implementation and contractual context.
That point is crucial for shipowners. A shipowner may be the regulated “shipping company” toward the ETS authority while lacking commercial control over the routeing, speed, waiting time, cargo choices, or port rotation that generate the emissions cost. Without a tailored contractual allocation, the owner may end up carrying a regulatory cost that it cannot recover in full from the commercial operator of the vessel. That is why EU ETS exposure is not merely a public-law issue; it is a charterparty risk-allocation issue.
FuelEU Maritime: Scope and Core Obligations
FuelEU Maritime imposes a different kind of obligation. The Commission’s FuelEU page states that ships above 5,000 gross tonnes calling at European ports must reduce the annual average GHG intensity of the energy used on board by reference to a 2020 baseline. The reduction trajectory is -2% in 2025, -6% in 2030, -14.5% in 2035, -31% in 2040, -62% in 2045, and -80% in 2050. The Commission also states that the regulation obliges certain ships to connect to onshore power supply at berth unless another zero-emission technology is used.
The Commission’s official Q&A makes the compliance timeline more concrete. It identifies two core obligations: first, the yearly GHG-intensity reduction target; second, the use of OPS or zero-emission technology while at berth. It then states that companies had to submit a monitoring plan by 31 August 2024, must collect the required voyage and fuel data from 1 January 2025, and must submit a ship-specific FuelEU report by 31 January of each verification period. The same Q&A states that, for containerships and passenger ships, the at-berth zero-emission rule applies from 1 January 2030 in ports covered by the Alternative Fuels Infrastructure Regulation and from 1 January 2035 in all EU ports equipped with OPS facilities.
The entity responsible for FuelEU compliance is not framed in exactly the same way as ETS. The Commission’s Q&A says that the responsible “company” is the entity responsible for the ship’s compliance with the ISM Code. In practice, that can be the shipowner or another entity distinct from the shipowner if ISM responsibilities have been delegated. That means FuelEU, like ETS, attaches first to the compliance-responsible ship-side entity, not automatically to the commercial party giving voyage orders.
This creates a second charterparty tension. The shipowner or ISM company may be responsible toward the regulator, but the charterer may control the bunkers ordered, the voyage pattern, the waiting time, and the commercial profile that drive the vessel’s FuelEU performance. The legal system therefore separates public-law responsibility from commercial control, and that separation has to be repaired contractually if the parties want cost and risk to follow operational decision-making.
Reporting, Verification, and Penalties
FuelEU compliance is not self-policing. It is built around a reporting and verification cycle. The Commission’s Q&A states that annual FuelEU reports must be submitted to a verifier, and that penalties apply where a ship shows a compliance deficit for the GHG-intensity target or, where relevant, the RFNBO sub-target, as of 1 June of the verification period. It further states that the company must pay the penalty by 30 June of that verification period and that the administering State is responsible for ensuring payment.
The same Q&A gives more detail on penalty exposure. For non-compliant port calls, it explains that the penalty is calculated by multiplying EUR 1.5 per kWh by the ship’s total power demand at berth and the number of non-compliant hours. For a GHG-intensity compliance deficit, the penalty is calculated under Annex IV of the regulation by reference to total ship energy consumption and the extent of the deficit. It also states that consecutive years of non-compliance trigger an increased penalty and that failure to pay can lead to expulsion from ports, flag detentions, and restricted access to ports in multiple Member States.
Those consequences matter greatly in legal-risk planning. FuelEU is not a soft ESG framework. It is an enforceable port-state regime with financial penalties and trading consequences. Once a ship moves into consecutive deficit territory, the problem is no longer only the current year’s compliance gap. It becomes an escalating operational risk that may affect redelivery negotiations, fleet deployment, and future chartering strategy.
FuelEU Flexibility Mechanisms: Banking, Borrowing, and Pooling
One of FuelEU’s most distinctive features is that it allows several flexibility mechanisms. The Commission’s Q&A states that banking and borrowing are available under Article 20, and pooling is available under Article 21. Banking allows a positive compliance balance to be carried into later reporting periods, and the Commission states that banked surplus does not expire. Borrowing allows a ship with a deficit to use an advance compliance surplus from the next reporting period, but the borrowed amount plus a 10% surcharge is deducted from that subsequent period. The Commission also states that there is no central registry for compliance units; the record of compliance is maintained in the FuelEU database on a ship-specific basis.
Pooling is different. The Commission explains that pooling allows the over-compliance of one ship to compensate the under-performance of another, provided the total pooled compliance remains positive. It also states that a ship’s compliance balance may not be included in more than one pool in the same reporting period, that a company must register its intention in the FuelEU database, and that the selected verifier must finalize and record the pool’s composition and allocation by 30 April of the relevant verification period. The Commission further says that the regulation itself does not fix a price for pooling; any cost is left to private agreements between the participating companies.
This is exactly where contract law becomes central. The regulation gives technical flexibility, but it does not tell shipowners and charterers how to share the economic benefits and burdens of that flexibility. If a charterer improves a vessel’s compliance balance through fuel choice or voyage pattern, should it capture the value of that surplus? If it uses borrowing, who bears the next period’s 10% surcharge? If a pool underperforms, who carries the compliance failure risk? Those are contractual questions, not regulatory ones.
Why BIMCO Clauses Matter
BIMCO has responded to this gap directly. Its official explanatory notes for the FuelEU Maritime Clause for Time Charter Parties 2024 say the clause is designed to explain and operate the allocation of responsibilities and costs between the parties. The notes then make the allocation logic more specific. BIMCO states that, under the clause, charterers may be given the right to instruct the owners to bank or pool compliance balances if the charter period covers a complete reporting period, and to use borrowing if the following reporting period falls entirely within the charter period. BIMCO also states that charterers should bear pool-entry costs and the risk of a pool not achieving compliance, while still receiving the benefit where positive compliance balance is successfully pooled.
The clause also introduces a surcharge logic. BIMCO’s published text and notes show that where the aggregated compliance balance is negative, owners provide charterers with independently validated information used to calculate a surcharge reflecting the expected FuelEU penalty, and charterers pay that surcharge according to the agreed frequency. BIMCO’s text further provides that owners may suspend performance if charterers fail to pay the surcharge, and that reimbursement mechanics apply if borrowing or pooling later reduces the final compliance exposure.
This is legally significant because it turns an uncertain public-law exposure into a contractual payment and reimbursement structure. Without such a clause, owners and charterers are left to argue later whether the costs should follow fuel ordering, operational control, or the public-law identity of the responsible company. With the clause, the parties at least have a contractual framework for cost recovery, data exchange, timing, and residual risk.
BIMCO has taken a similar approach under ETS. Its guidance explains that it has developed specific clauses for voyage charters, time charters, COAs, SHIPMAN structures, and memoranda of agreement, because the allocation problem is different in each commercial setting. BIMCO’s ETS guidance explicitly warns that the directive’s “operation of the ship” concept does not automatically solve charterparty reimbursement questions, especially under English law and in contracts involving non-EU parties.
Legal Compliance Strategies for Shipowners
For shipowners, the first legal strategy is to separate regulatory responsibility from commercial reimbursement. Under both ETS and FuelEU, the responsible entity toward the regulator is typically the shipping company or ISM company. That public-law position must be accepted and managed through accurate monitoring, reporting, verifier coordination, and timely surrender or payment. But that does not answer who should ultimately bear the economic burden under the charter. Owners should therefore treat ETS and FuelEU first as compliance obligations and second as contractual recovery problems.
The second strategy is to build a data governance system that can survive scrutiny. The Commission requires voyage-by-voyage and fuel-by-fuel recording under FuelEU, including ports, dates, times, at-berth energy use, OPS connection or exceptions, fuel quantities, well-to-tank and tank-to-wake factors, substitute energy used, and in some cases ice-class data. Under ETS, companies must report emissions that then determine allowance surrender. In practice, weak internal data governance will undermine not only public-law compliance but also any private-law claim for reimbursement against charterers.
The third strategy is to decide early whether the fleet will rely primarily on fuel switching, operational efficiency, banking, borrowing, pooling, or a mixture of them. The Commission and EMSA both emphasize that pooling and banking are real flexibility tools, but they also show that those tools are administratively structured and time-bound. Owners cannot assume that pooling will be available or economical after the fact. It must be planned.
The fourth strategy is document-specific drafting. Time charters, voyage charters, COAs, and management agreements raise different cost-allocation questions. BIMCO’s published ETS and FuelEU clauses exist precisely because no one-size-fits-all solution works across all contract types. For owners, the safest legal position is to avoid relying on implied reimbursement arguments where a clause can address the point expressly.
Legal Compliance Strategies for Charterers
For charterers, the key legal strategy is to recognize that ETS and FuelEU are not simply “owners’ regulatory problems.” In a commercial sense, charterers often control the variables that drive compliance cost: speed, route, waiting time, bunkers ordered, cargo profile, port rotation, and at-berth behavior. BIMCO’s ETS guidance repeatedly stresses that the directive’s “operation of the ship” language points toward commercial control factors such as cargo, route, and speed. That makes it risky for charterers to assume that silence in the contract means the owner will bear the whole burden.
The second strategy for charterers is to focus on verification rights and transparency. If owners are seeking ETS reimbursement or FuelEU surcharge payments, charterers should require validated calculation data, reporting timelines, and contractual rights to test the basis of the claim. BIMCO’s FuelEU clause structure is instructive here because it expressly ties surcharge claims to independently validated information and creates reimbursement logic where later pooling or borrowing improves the compliance result.
The third strategy is to think about charter duration. FuelEU flexibility rights, especially banking and borrowing under the BIMCO time-charter clause, are tied to whether the charter period covers a complete reporting period or consecutive reporting periods. Short charters, split periods, and redelivery during the verification window create special complexity. If the contract ends before the consequences of the reporting period are finally known, later disputes about penalties and reimbursement are highly likely unless the clause deals with them expressly.
The Disputes We Are Likely to See
These regimes are still relatively new, but the likely dispute categories are already clear. One category concerns reimbursement: whether the owner can recover ETS allowance cost or FuelEU penalties/surcharges from the charterer. A second concerns data integrity: whether the fuel and voyage data underlying the claim were recorded and verified properly. A third concerns pooling and borrowing outcomes: who gets the benefit of positive compliance balance, who bears a failed pool, and whether borrowing was lawfully instructed and correctly reflected in later periods. A fourth concerns redelivery: who carries the tail-end exposure where the charter period ends before verification and compliance settlement are complete.
A fifth dispute category is regulatory enforcement spillover. The Commission’s FuelEU Q&A states that non-payment of FuelEU penalties can lead to port expulsion, flag detention, and wider access restrictions. That means a private-law disagreement between owner and charterer may quickly become a public-law trading problem if not resolved in time. In other words, charterparty disputes under ETS and FuelEU are not purely money disputes. They may affect the vessel’s ability to trade.
Conclusion
EU ETS and FuelEU Maritime: Legal Compliance Strategies for Shipowners and Charterers is now one of the most important subjects in shipping law because the two regimes directly affect cost, operations, charterparty drafting, and market access. The EU ETS covers large ships above 5,000 GT entering EU ports, captures 100% of intra-EU and in-port emissions and 50% of extra-EU voyage emissions, and phases in surrender obligations from 40% to 70% to 100%. FuelEU Maritime applies to commercial ships above 5,000 GT carrying cargo or passengers, imposes a declining lifecycle GHG-intensity standard from 2025 to 2050, adds OPS/zero-emission obligations for certain ships at berth, and enforces compliance through reporting, verification, penalties, and port-state consequences.
For shipowners, the main legal task is to remain regulatorily compliant while contractually recovering the right costs from the right commercial counterparties. For charterers, the main task is to understand that operational control now has carbon-cost consequences and that silence in the charter is dangerous. For both sides, the safest approach is the same: clear clause drafting, disciplined data governance, early decisions on compliance strategy, and close attention to reporting and verification timelines. In this new regulatory environment, carbon compliance is no longer a technical side issue. It is part of the core legal economics of the charterparty.
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