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Clyde & Co on legal issues pertaining to bio bunker fuels in international shipping

Paul Collier and Benjamin Soh highlighted several key legal issues raised with the use of biofuel bunkers which should be considered by parties prior to their purchase and consumption on ships.




Paul Collier

International law firm Clyde & Co LLP on Tuesday (28 March) published an insight highlighting several key legal issues raised with the use of biofuel bunkers:

By Paul Collier, Partner, and Benjamin Soh, Associate, of Clyde & Co 

Biofuels are poised to play an increasing role in international shipping as part of global efforts to decarbonise the sector. However, the use of biofuels raises several important legal issues which should be considered by parties prior to their purchase and consumption on ships.

Potential benefits from the use of biofuels by ships

There are two main regulatory regimes which provide significant incentives for shipowners and ship operators to shift to using biofuels.

First, the IMO introduced a target for achieving net zero greenhouse gas (“GHG”) emissions by or around 2050, as well as an interim target for reducing GHG emissions by at least 20% by 2030. As part of this initiative, shipowners are required to calculate and report their vessel’s carbon intensity annually under the Carbon Intensity Indicator (“CII”) regime and vessels will receive a CII rating ranging from A to E. Biofuels which have appropriate international certification and provide a well-to-wake GHG emissions reduction of 65% compared to marine gasoil (“MGO”)[1] may be assigned a lower carbon emission factor. This could potentially assist shipowners and ship operators with retaining or improving their vessel’s CII rating.

Secondly, the EU has taken steps to incentivise decarbonisation, as part of their target of achieving a 55% GHG emissions reduction by 2030. Starting from 1 January 2024, the EU has extended the application of the EU Emissions Trading System (“EU ETS”) to shipping. Shipping companies are now required to surrender emissions allowances for CO2 emissions on voyages to or from the EU. In addition, from 1 January 2025, FuelEU Maritime (“FuelEU”) will also be applicable, requiring significant reductions in the GHG intensity of fuel used by ships, with penalties for failing to comply with GHG intensity reduction targets. Vessels consuming biofuels which meet sustainability and GHG emissions saving requirements and are certified under the Renewable Energy Directive 2018/2001 (“RED II”), will benefit from preferable calculations of their emissions and GHG intensity, compared to the position if they continued solely consuming fossil fuel bunkers.

The CII and EU regimes, therefore, heavily incentivise the consumption of biofuels that meet applicable certification requirements.

Biofuels also offer a significant advantage compared to other forms of zero and low carbon technology, because they can operate as “drop-in” fuel (i.e. biofuels could potentially be used in conventional ship engines without any engine modifications). The use of biofuels could, therefore, allow shipowners to achieve GHG emissions reductions without expensive outlays on new ships or vessel modifications, that would otherwise be required for other forms of alternative fuel technology.

Benjamin Soh

Issues relating to sustainability, emissions savings, and certification

Whilst there are considerable potential benefits for shipowners and ship operators in using biofuels under the CII and EU regimes, they should be mindful that these potential benefits are conditional on biofuels meeting the applicable sustainability and emission reduction criteria, as well as on receiving appropriate certification. If the biofuel does not meet the applicable standards or have the appropriate certification, then, under the CII and EU regimes, the biofuels are likely to be treated as producing emissions equivalent to the fossil fuel type. This would place shipowners and ship operators opting for biofuels in no better position than if they had continued using fossil fuel bunkers.

For this reason, it is essential for parties to consider whether the contractual wording in their charterparties and in biofuel supply contracts adequately protects their position.

Where shipowners are time chartering a vessel and have agreed that time charterers may stem biofuels, shipowners should carefully consider whether their charterparty terms properly set out the specification and certification requirements for any biofuels stemmed. Here, shipowners could be exposed to the risk that their time charterers might not stem appropriately certified biofuel, such that they do not receive any preferential treatment under the CII and EU regimes as compared to the position if the vessel had consumed fossil based bunker fuel. If this were the case, shipowners could face unexpected penalties and suffer losses.

Biofuel purchasers should consider whether the supply contracts include adequate provisions to protect their position under the regulations, for example, by including warranties that the biofuel meets applicable international standards, that evidence of certification will be provided, and that Bunker Delivery Notes (“BDN”) provided by the supplier will include details of the GHG emissions for the production and use of the biofuel supplied.

More generally, biofuel purchasers and sellers should consider whether the terms of the supply contract should include a mechanism for advancing claims for losses if there is a lack of appropriate certification. Typically, most bunker supply terms and conditions contain short time bars and provisions restricting claims for consequential loss. It may be that such contractual provisions could restrict the ability of purchasers to advance claims for consequential loss which arise from a lack of certification or from non-compliance with sustainability or emissions reduction criteria.

Potential issues with biofuel quality, handling, and storage

A further point worth considering relates to the quality of biofuels and to related onboard handling and management issues.

Bunker quality issues are not uncommon when it comes to traditional fossil based marine fuels. However, the use of biofuels presents additional challenges for shipowners, ship operators and bunker suppliers, given their unique physical characteristics and the fact that many vessels will have limited experience of handling and storing them.

Particular concerns revolve around difficulties with respect to the oxidation stability and cold flow properties of biofuels, the possibility that biofuels could cause the corrosion of engine parts and clog fuel filters, and the risk that biofuels could degrade in quality whilst stored in vessel tanks.

There is currently no clear international standard setting out quality specifications for biofuel bunkers. ISO 8217, which sets out quality specifications for conventional marine fuel oil, only covers biodiesel blends containing up to 7% of fatty acid methyl ester (FAME) by volume. While the ISO continues to work on the next ISO 8217 standard, with the intention of including specifications for biofuels, national authorities are stepping in to provide temporary frameworks for quality and testing of biofuel bunkers.

Singapore has developed its own specification for marine biofuel (WA 2:2022), which incorporates additional quality parameters and testing methods seeking to address the unique physical characteristics of biofuels. Meanwhile, South Korea has announced that it will be issuing its own standard for marine biofuel this year, ahead of planned biofuel bunkering trials, with a view to fully adopting biofuel bunkering by 2025.   

In the absence of a recognised international standard for biofuels, buyers may wish to consider protecting their position by requiring that fuel supplied complies with a national specification or alternatively by agreeing bespoke terms regarding the specification of the biofuel to be supplied. Furthermore, given potential issues in relation to the quality of biofuels, it would be prudent for buyers to put in place robust testing and handling procedures to mitigate the risk of bad biofuel bunkers, and to avoid potential damage to vessel engines. This may involve testing for additional parameters that are not included in table 1 or 2 of ISO 8217.

Finally, given the risk of degradation of biofuels and the short time bars for quality claims typically found in bunker supply contracts, it is recommended that prompt fuel sampling takes place and that evidence of the handling and storage of the biofuel on the vessel is retained in the event of a bunker quality dispute. From the bunker supplier perspective, if any engine problems are alleged following the consumption of biofuels, it is likely to be worth investigating whether the biofuel was properly handled and stored on board, as this could potentially be a cause of any problems experienced.


Photo credit: Clyde & Co 
Published: 16 May 2024

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DB Schenker to ship Avolta cargo between Europe and US with bio bunker fuel

All containers that Avolta will move on the Barcelona – Miami route, using biofuel, will be shipped on low emission through application of waste-based marine biofuels and additional units of sustainable marine biofuel.





DB Schenker

Travel retailer Avolta recently said it entered an agreement in Spain with logistics service provider DB Schenker for the transport of goods using marine biofuel between Europe and the United States.

From now on, all containers that Avolta will move on the Barcelona - Miami route, using biofuel, will be shipped on low emission through the application of waste-based marine biofuels and additional units of sustainable marine biofuel, to achieve additional compensation of the biofuel’s upstream emissions.

“This biofuel switch could prevent over 150 tons of CO2e Well-to-Wake emissions per year, based on Avolta’s 2023 container volume on this route, reducing up to 84% of the CO2 emissions,” the firm said.

The fuel used is Used Cooking oil methyl ester (UCOME) and is based on renewable and sustainable sources, mainly waste cooking oil. 

The application will be guided by the Book & Claim System, a set of principles that have been developed through a global, multi-stakeholder process with third-party validation to ensure that the use of this chain of custody model has full traceability and credibility, as well as a demonstrable climate impact.

Camillo Rossotto, Chief Public Affairs & ESG Officer Avolta, said: “We are taking a significant step forward towards decarbonising our shipments and route transportations.”

“This agreement represents the starting point of the transitioning to biofuel for ocean freight which will contribute to decarbonising our logistic emission. Our company's commitment to sustainability is firm and long-term and, as proof of this, we are planning to increase the volume of containers transported using biofuel, advancing in the sustainable and low-emission transportation industry."

Miguel Ángel de la Torre, director of maritime transport at DB Schenker in Iberia, said: "Our mission is to help, facilitate, and guide our customers in the sustainable transformation, and on this occasion, we are doing so by offering this biofuel so that they can convert their freight transport into low-emission transport.”

“In this way, our customer Avolta is not only pioneering and helping to reduce emissions but is also ahead of the new regulations and associated benefits that will be tightened in the coming years.”


Photo credit: DB Schenker
Published: 24 June, 2024

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UECC reduces emissions in 2023 by more than doubling bio bunker fuel use

UECC boosted the use of ISCC-certified sustainable biofuel B100 on both owned and time-chartered ships to 14,000 mt last year, up from 6,500 mt in 2022.






United European Car Carriers (UECC) recently announced its progress of using alternative bunker fuels and said it was on track to exceed its goal of a 45% emissions reduction by 2030 after more than doubling biofuel usage across its fleet last year.

UECC boosted the use of ISCC-certified sustainable biofuel B100 on both owned and time-chartered ships to 14,000 metric tonnes (mt) last year, up from 6,500 mt in 2022.

The company achieved a total tank-to-wake emissions reduction of over 60,000 tonnes across its 14-vessel fleet in 2023, of which it is estimated increased biofuel use accounted for 40,000 tonnes, with the remainder coming from LNG. This was a near-250% increase on the emissions cut of 24,200 tonnes achieved in 2022.

TheEuropean sustainable shortsea carrier said it has made significant strides in decarbonisation of its fleet of pure car and truck carriers (PCTCs) with the addition of five LNG-fuelled newbuilds and the increased rollout of biofuels in recent years - and this is now showing commercial payback for clients in the light of new green regulations, according to Energy and Sustainability Manager Daniel Gent.

“Consequently, we are well on the way to reach or exceed our 45% emissions reduction target by 2030. This clearly has a positive impact for those bio-supportive cargo owners in terms of reducing costs related to the EU Emissions Trading System (EU ETS),” Gent said.

“Furthermore, 85% of the vessels in our fleet achieved a C-rating last year with the IMO’s Carbon Intensity Indicator (CII) and this year we expect all our ships to achieve this rating or above.”

Gent also pointed out the UECC fleet is already in surplus in relation to the requirement for an average 14.5% reduction in GHG intensity by 2035 under the FuelEU Maritime regulation due to be implemented next year.

The environmental performance of UECC’s current fleet of nine owned and five time-chartered PCTCs has been enhanced through delivery over the past seven years of five eco-friendly newbuilds - a pair of dual-fuelled LNG vessels and trio of multi-fuel LNG battery hybrid units.

The use of LNG reduces emissions of CO2 by around 25%, SOx and particulate matter by 90% and NOx by 85%, while the latest battery hybrid newbuilds exceed the IMO target to reduce carbon intensity by at least 40% from 2008 levels by 2030.

UECC is now looking at sourcing alternative carbon-neutral fuels such as bio-LNG and e-LNG for these vessels to further improve their green performance, according to Gent.

UECC’s adoption of alternative fuels has expanded exponentially since the programme was launched in 2020 with piloting the use of biofuel on its vessel Autosky, bolstered by valuable support from owners of its time-chartered vessels, clients such as BMW, fuel suppliers like GoodFuels, industry partners, and parent companies NYK and Wallenius Lines.

“We are now in the fifth year of running our biofuels programme and it has gone from strength to strength. UECC has sought to take a leading role through early-stage analysis of new biofuels to evaluate their potential in terms of technical suitability, sustainability and commercial viability, both  to deliver the best solution for our customers and give the sector a blueprint for assessment and adoption of such fuels based on these three pillars,” Gent explained.

He added that, in terms of sustainability criteria, the company looks for biofuels with the biggest environmental impact, with a typical minimum 90% reduction in GHG intensity from well-to-wake compared with conventional marine fuels. 

UECC has steadily expanded the use of green fuels to cover 30% of its fleet in 2023, up from 18% in 2022, and is on track to achieve 50% coverage this year towards the goal of 80% by 2030, though Gent is confident of surpassing this figure.

He said being proactive in trialling new alternative fuels has also promoted engagement with fuel providers, which has led to UECC’s latest initiative together with biofuel supplier ACT Group as part of an industry collaboration to test the Cashew Nut Shell Liquid (CNSL)-based biofuel FS.100 that he believes has “great potential for sustainable shipping”.

“Increasing the pool of sustainable drop-in fuels offers a pathway for shipping to achieve rapid emissions cuts on existing vessels. Combining alternative fuels with energy efficiency measures such as hull cleaning and electrification with shore power can further accelerate decarbonisation,” Gent said.

“By progressively advancing the use of alternative fuels, we are reducing emissions exposure for our clients and securing regulatory compliance long into the future, while also promoting industry efforts to reach the net-zero goal,” he concluded.


Photo credit: United European Car Carriers
Published: 21 June, 2024

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Singapore: GCMD studies FAME biofuel degradation in bunker supply chains

Latest report by GCMD, which tracked quality of FAME and FAME blends across maritime supply chain, found that trials detected no significant degradation of FAME under commercial operations conditions.





Singapore: GCMD studies FAME biofuel degradation in commercial and storage conditions

The Global Centre for Maritime Decarbonisation (GCMD) on Tuesday (18 June) announced the release of its latest report,aimed to shed light on its findings from tracking the quality of FAME and FAME blends as they make their way through the supply chains and on consumption onboard vessels.

GCMD said Fatty Acid Methyl Esters (FAME), a readily available biofuel, is gaining attention as an immediate solution to comply with EU and IMO regulations.

FAME use in major bunkering hubs Singapore and Rotterdam has risen from being negligible in 2020 to a combined 1 million metric tonnes (mt) of FAME blends in 2023.

“Unlike conventional marine fuels, FAME-based biofuels can be unstable since its natural oils and fats can slowly oxidise when exposed to atmospheric oxygen,” it said. 

When oxidation happens, FAME can degrade to produce by-products, like peroxides, alcohols, and sludge, all of which can impact engine life and performance. Degradation can also be further accelerated by exposure to water, impurities, contaminants, light, and heat.

The report, titled Tracking the propensity of biofuels degradation across the maritime supply chain, sheds light on a crucial question: Does FAME degrade significantly under actual commercial and storage conditions in the marine supply chains, hindering its potential as a widespread decarbonisation solution?  

Key insights and takeaways

 Encouragingly, GCMD said end-to-end supply chain trials detected no significant degradation of FAME under commercial operations conditions.

“These findings offer strong support for FAME use in the marine fuels supply chain,” it said. 

The report elaborates how the team traced the properties of FAME and FAME blends, and tracked the parameters of FAME quality, namely acid value, viscosity, FAME content, energy content and microbial contamination, of samples at different points along the supply chain to come to this conclusion.

What the report covers

  • Understanding the propensity of degradation of FAME
  • Tracing FAME quality in GCMD’s end-to-end supply chains
  • Understanding the current ISO specifications for FAME quality requirements
  • Contextualising GCMD’s findings per ISO specifications

The report is co-authored by Dr. Prapisala Thepsithar, Director of Projects, and Dr. Sanjay Kuttan, Chief Strategy Officer, at GCMD. 

It has also been reviewed by industry leaders: Dr. Malcolm Cooper, CEO of VPS, Captain Rahul Choudhuri, President, Strategic Partnerships, VPS and Ms. Monique Vermeire, Fuels Technologist at Chevron.

In a social media post, Capt. Rahul Choudhuri, President Strategic Partnerships, said: “VPS is very proud to have supported the Global Centre of Maritime Decarbonization (GCMD) in this vitally important work of understanding the nature of Biofuels Degradation.”

VPS said the biofuels study showed levels of fuel degradation in a real-world environment. Whereas the trials indicated no degradation of the Biofuels over the nominated transportation section & supply to the vessel

Note: The report titled ‘Tracking the propensity of biofuels degradation across the maritime supply chain’ can be found here


Photo credit: Global Centre for Maritime Decarbonisation
Published: 19 June 2024

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