Maritime decarbonisation is rapidly evolving due to escalating regulatory, technological, and contractual changes. In light of these developments, a fundamental inquiry emerges for 2025: as you aim to reduce greenhouse gas (GHG) emissions by utilizing biofuels, how will this affect your charterparties and fuel supply contracts? The legal framework governing maritime operations is shifting significantly. Beginning January 1, 2025, the FuelEU Maritime initiative will regulate the GHG intensity of energy used aboard ships.
Moreover, the International Maritime Organisation (IMO) is expected to adopt a Net Zero Framework (NZF) by 2028, further setting global standards for the GHG intensity of marine fuels. These regulations complement existing incentives, such as the IMO’s Carbon Intensity Indicator (CII) and the European Union’s Emissions Trading Scheme (EU ETS), that promote the use of biofuels. For time charterers, who often bear the responsibility for fueling ships and are liable for penalties under the outlined regulations, biofuels present a viable strategy for reducing emissions. However, traditional time charterparty agreements do not adequately address the complexities associated with transitioning to biofuels, necessitating amendments.
The time charterparty includes crucial provisions about fuel specifications and handling, yet it typically lacks clarity on handling biofuels. Key issues arise concerning the owners’ ability to manage different fuel types, the conditions under which biofuels may be used, and the valuation of biofuels during delivery and redelivery. It is essential for both parties to consider these challenges, clarify responsibilities, and amend the charterparty terms accordingly. Additionally, charterers must reassess fuel supply agreements to include specifications on GHG intensity, permissible feedstocks, and sustainability documentation.
Compliance with sustainability criteria is vital for enhancing the benefits of biofuels, as failing to meet these standards could nullify the intended emission reductions. Given the costs associated with biofuels and potential risks to vessels from improper handling, it is in the best interest of charterers to protect themselves through clear contractual definitions concerning biofuel management and ownership. If these issues remain unaddressed, charterers risk incurring penalties without realizing the expected advantages of switching to biofuels. Finally, successful compliance may also open avenues for trading any surplus benefits derived from biofuel usage, further enhancing its role in maritime decarbonisation.