INTERVIEW: NYK Europe warns against fragmented maritime emissions rules

Overlapping regimes for maritime greenhouse gas emissions would be "hugely detrimental" to global shipping by enacting multiple bunker fuel standards, NYK Group Europe President and CEO Carl-Johan Hagman has warned, while urging policymakers to pursue a global framework.

In mid-October, International Maritime Organization member states voted to postpone the adoption of the Net-Zero Framework by a year amid strong US opposition, raising doubts over the future of decarbonization regulation.

The EU has extended its Emissions Trading System to cover shipping since 2024, while imposing FuelEU Maritime rules on marine energy's GHG intensity from January 2025. Many industry participants -- including S&P Global Energy -- anticipate a more fragmented regulatory landscape following the IMO delay, as countries such as Turkey and China, among others, may potentially establish their own shipping emission rules.

"It is important that both the EU ETS and FuelEU Maritime do not trigger or stimulate similar actions from other parts of the world," Hagman told Platts in a recent interview. "[That] would be hugely detrimental to shipping and to global trade."

Regional regulators could be "well-meaning in trying to decarbonize the world" while creating "complexity that I think people outside the business do not fully understand," said Hagman, who heads Japanese shipping group NYK's European operations.

The EU ETS takes into account tank-to-wake emissions, while FuelEU Maritime adopts a well-to-wake system. The IMO could use different default emission factors for bunker fuels from the EU.

"Now, add other systems to that ... it would create a logistically very challenging system," as the same fuel could be deemed to have different emissions in different jurisdictions, while having the same physical characteristics, Hagman said.

The European Commission had promised to "review" the ETS for shipping and FuelEU Maritime if the IMO framework was adopted, but some industry participants and EU member states were hoping the EU executive could explicitly state it would roll back the regulations.

"We have a lot of sympathy for the EU's intentions and ambitions to decarbonize Europe. But in order to do that, they are actively breaking up the global IMO system," Hagman said.

Compliance

On its path to net zero by 2050, NYK has set interim targets to reduce scope 1 and 2 GHG emissions by 45% by 2030 from 2021 levels -- which, according to Hagman, are already stricter than FuelEU Maritime and the proposed IMO framework.

Hagman said NYK has been "doing alright" in complying with EU regulations, with many ships in its large fleet capable of burning LNG and increasing biobunker use.

NYK, one of the world's largest shipping companies, operated 934 ships as of end-September -- including 93 LNG carriers that can run on LNG due to propulsion design, according to the company. It also had 25 LNG-capable ships of other types.

While a fossil fuel, LNG is a compliant fuel under FuelEU Maritime well into the next decade, as it could reduce emissions by 20%-30% versus conventional, oil-based fuels, allowing its users to generate compliance surpluses. Hagman said the surpluses would be shared with other NYK ships burning oil-based bunker fuels, and NYK is studying opportunities to sell them via pooling with other shipping companies as well.

The OceanScore Pool-Price Index -- an indicator for the unit cost of FuelEU compliance in pooling arrangements -- was Eur215.75/mtCO2e ($249/mtCO2e) on Nov. 6, up 4.4% from the previous month.

Meanwhile, NYK reported 251,000 metric tons of B24 biobunker use in fiscal year 2024-25 (April-March), up from 6,287 mt in the prior year. "We are relatively large buyers of biofuels" in Europe, Hagman said. "It is very locally produced, and it is the logistics solutions, to a degree, that determine the price."

The Net-Zero Framework was designed to place a cost on maritime GHG emissions from 2028, but the recent IMO decision would push back its implementation date by at least a year.

A carbon price on bunker fuels would incentivize shipping companies to sign more offtake agreements, according to Hagman. "Without large-scale offtake agreements, production volumes will not materialize," he said. "And currently, we are not seeing green fuels at scale, and therefore, the price is not coming down."

October's average delivered bunker price for 0.5% sulfur fuel oil, the most common bunker type, was $10.47/Gigajoule in Rotterdam, compared with $13.84/Gj for LNG and $39.20/Gj for unsubsidized bio-LNG, according to the Platts bunker cost calculator. E-ammonia cargo prices for delivery to Northwest Europe were $45.08/Gj.

Besides minor success in the cruise, container and vehicle shipping sectors, Hagman said it has been difficult to pass incremental costs associated with sustainable fuels to cargo owners.

"Very few are willing to pay any kind of cost increases, regretfully," he said. "Any reductions beyond what the law requires are really altruism from the shipowner or ship operator's point of view."