2025 marked a turning point for shipping’s decarbonisation journey. In September, shipowners faced their first compliance deadline under the EU Emissions Trading System (EU ETS), requiring vessels that called at EU ports in 2024 to surrender carbon allowances for their verified emissions. These payments were made in the form of EU Allowances (EUAs), which are traded on an open market.

To ease the industry into the system, EU ETS required allowances surrendered in 2025 to cover 40% of liable emissions. However, from 2026, shipping companies will be required to submit allowances covering 100% of their verified CO₂ emissions – significantly increasing financial exposure.

Each year the EU also reduces the number of allowances available in the market, deliberately tightening supply to incentivise emissions reductions. As the maritime industry’s liability for its emissions increases, the allowances available to buy will be reduced. Shipowners that take no action to lower carbon emissions could be exposed to higher costs for their allowances or even have to pay penalties. If shipowners continue to procrastinate about compliance, the risks will go beyond higher operational costs to include reduced competitiveness and reputational harm as the regulation matures in years ahead.

Likewise, the EU has also adopted an incremental approach to its fuel standard, FuelEU Maritime, which requires vessels to lower the carbon intensity of the fuels they use against a 2018 baseline. From 2025, they must deliver a 2% reduction, jumping up to 6% in 2030 and continuing to increase every five years thereafter to an 80% reduction by 2050. The first FuelEU Maritime monitoring period ends on 31 December 2025, at which point shipowners will need to demonstrate they have complied over the year or face financial penalties.

Both regulations aim to reduce shipping’s carbon emissions. But for vessel owners that are prepared to do more than simply ensure compliance, there are opportunities in taking a strategic approach to planning fuel procurement and regulatory compliance to optimise costs.

An opportunity to optimise strategies
Compliance with the European Union’s regulations is complex. EU ETS compliance requires a considered strategy for buying and trading emissions allowances, but this can be onerous for shipowners focused on their maritime operations with only small teams to oversee areas of fuel procurement and regulatory compliance.

Working with specialists who understand carbon markets and have the financial capability to execute optimised EUA strategies can materially improve outcomes. Just as importantly, working with a partner already embedded in your fuel procurement and operational realities allows compliance to be managed within a single, trusted relationship. This integration matters. When fuel strategy and carbon strategy are managed in silos, complexity increases and risks multiply. When they are aligned, ship owners and operators gain clearer oversight, reduce administrative burden and unlock cost efficiencies.

Biofuels illustrate the potential impact of a well-considered strategy. Drop-in biofuels can replace traditional fuels without the need to invest in expensive retrofits or new technology; blended with traditional fuels they immediately lower emissions and lower EU ETS exposure. Further, to meet the FuelEU Maritime-mandated 2% reduction in the carbon intensity of fuels, the maritime industry is estimated to have needed as much as 600,000-700,000 mts of B100 biofuel in 2025. However, the market remains nascent as producers remain cautious about getting ahead of demand. With supply concentrated in just a few ports, biofuels are a transitional solution rather than a long-term one.

Getting it right
Tapping into the real carbon reduction potential of biofuels means ensuring the right certifications are in place. Rigorous certification regimes track feedstocks from sourcing to processing to confirm the carbon footprint of fuels throughout their lifecycle.

Shipping is not alone in competing for biofuels. Aviation and road transport increasingly demand higher quality fuels than shipping and are often willing to pay a premium. Over time, shipping risks losing out to these industries unless it can demonstrate demand and offtake potential.

To respond to this competition, advanced bio-feedstocks are beginning to emerge in the marine energy sector. However, the nature of these fuels means shipowners will need time to feel confident about their quality and sourcing, reinforcing the need for robust certification.

Under FuelEU Maritime, only fuels certified by an accredited verification scheme contribute to compliance. Operators will need sustainability declarations that confirm feedstock origins, lifecycle GHG performance, and compliance with the EU’s Renewable Energy Directive (RED), making certification an essential part of how biofuels flow into the marine market under FuelEU Maritime. As a result, suppliers and traders serving FuelEU-regulated customers are increasingly aligned with recognised schemes such as ISCC to ensure their products can be verified for regulatory use, creating greater consistency and clarity across the supply chain.

Beyond compliance, certification provides broader value. It underpins confidence in reported emissions reductions, reduces reputational risk and supports a more transparent, competitive market for low-carbon fuels. Many established marine fuel suppliers like KPI OceanConnect already operate within accredited frameworks, enabling shipowners to integrate biofuels into their decarbonisation strategies with greater certainty.

In this regulatory environment, the value of the right partnerships cannot be overstated. Industry expertise, financial strength and global scale, as well as practical experience all make a tangible difference in enabling ship owners and operators to navigate evolving regional requirements, source alternative fuels with confidence and integrate them effectively into their decarbonisation strategy. Serving as a counterparty of strength, the right partner can develop a plan for compliance that helps owners and operators remain cost competitive and continue to operate as usual while pursuing decarbonisation.

Achieving low emissions at competitive prices is a realistic and valuable goal for vessel operators, that can be realised if they work with partners to develop strategies that take advantage of joined up regulatory compliance and trading strategies for fuel and carbon allowances.
Source: By Jesper Sørensen, Global Head of Alternative Fuels and Carbon Markets, KPI OceanConnect