Fuel EU – or why one and one doesn’t always equal two.
The question came up yesterday after my presentation at the maritime business breakfast on Fuel EU: “You said you shouldn’t simply add up Fuel EU penalties for individual months. But I recently heard that you can easily. So what’s the point?”
Anyone who has to settle Fuel EU penalties monthly may encounter a strange effect in the medium term: If you calculate the penalties for individual months of a year and add them up, you get a different result than if you settle all months together at once.
That sounds like rounding or calculation errors at first, but that’s not it. The reason for this effect lies in the mathematical formula for calculating penalties within EU Regulation 2023/1805. Anyone interested in the mathematics involved is welcome to contact us.
But the listener’s question still bothered me. I’ve now recalculated an example. And indeed: As soon as more than one type of fuel with different emission factors is used within a year, the sum of the parts deviates from the (correct) total.
This effect means that shipping companies can only calculate the final penalty amount after the annual financial statements have been closed, which in turn makes mid-year ship sales more difficult. It’s a bit like buying a house and having to take over the heating bill from the previous owner without knowing the amount.
And the solution? Anyone who has to settle EU fuel penalties with charterers should agree on appropriate contractual compensation clauses, always calculate the values year-to-day, and keep records of the differences accordingly.
If you want to see for yourself, here’s the example calculation.
The world isn’t getting any easier. Stay tuned.
Photo by George Becker/ Pexels
