EUROPEAN shipping regulators are being asked to reconsider barring vessels carrying fossil fuels from qualifying with the bloc’s taxonomy regulation, with shipowners arguing that it could exclude the region’s banks from financing their assets.

Banks, financial services and some shipowners must report to national authorities whether their investments and businesses align with the European Union’s sustainability goals under taxonomy rules, which entered into force in July 2020.

For banks, this includes gathering technical data and other disclosures from the shipping companies they finance, with additional screening from July 2023.

Bigger shipowners with more than 250 employees also must disclose how their turnover, capital expenditure and operating expenses align to the framework and how they aim to improve over 10 years.

The classification system for sustainable economic activities covers 13 sectors including maritime transport, and will soon sweep shipping into its wake, a Maritime Cyprus panel heard.

“Give us the tools to make investments and seek financing,” said Thanassis Antonakis, the deputy chief financial officer of Safe Bulkers, whose fleet of bulk carriers does not qualify as a sustainable investment under the taxonomy. “If you make it harder for EU-based shipping companies get the [money] for their transitional investment then they will seek finance elsewhere,” he added.

Fotini Ionannidou, from the European Commission’s directorate general for transport (DG-MOVE), was on the panel and listened to arguments presented by Mr Adamaopoulos and other industry leaders.

“The logic of the taxonomy is to reward over-compliance, and best-in-class green investments,” Ms Ioannidou said.

A commission milestone was to have the first zero-emission ocean-going vessel ready for market by 2030.

The EU qualified best-in-class for passenger water transport as those ships that used 50% of zero-emission fuels, measured by onboard combustion only, an assessment known as tank-to-wake, or tailpipe emissions.

This was likely to be extended to well-to-wake assessments that covered emissions from production as well, she said.

To qualify under freight transport, hybrid vessels must have half of their fuel consumption measured as zero-emission fuels or had Energy Efficiency Design Index calculations 10% below what was required.

Controversially, vessels excluded from the sustainability criteria under the taxonomy are those dedicated to shipping fossil fuels, which covers tankers, most bulk carriers, and liquefied natural gas carriers.

A total of 10% of global shipping was aligned with EU taxonomy based on data examined from the International Maritime Organization, according to Ms Ioannidou.

About 40% of general cargo vessels complied with taxonomy definitions for maritime transport, but only 1% of bulk carriers, she said.

Furthermore, vessels that met these conditions only qualified under the taxonomy until the end of 2025, when it would be amended again.

Shipowners told Ms Ioannidou this further stoked investment uncertainty because of the longer life of shipping assets.

“We would like to see the ‘grandfathering’ of projects so that those that invest now can be assured that this can continue post 2025,” she told the conference.

The practice of ‘grandfathering’ refers to provisions that exclude existing businesses from complying with any updated or changed rules.

“Our role as DG-MOVE regulating transport is to listen to the sector and give the input to our colleagues, so that the needs of the sector are taken into account, in line with our policy objectives,” Ms Ioannidou said.

The next delegated act — EU jargon for non-legislative acts that supplement EU laws — is planned by the end of the year.

“Shipping is in a transition phase and the taxonomy does not recognise transition,” said Katalin Dobranszky, from the European Community of Shipowners’ Associations. “Banks and investors will be asking you to report on the taxonomy because they need to report to their own countries. For the small and medium-sized companies, this is going to be a burden due to the complexity, which requires expertise and incurs administration costs, in order to address this.”

Ms Ioannidou said: “We are very cautious that there is a lot of work ahead of us. There are many things to be cleared and done and simplified. We exactly share the same aim. We want the taxonomy to work on the ground, and of course, to push the most ambitious solutions. But our criteria should be practical at the same time and implementable, so we are very conscious of the challenge.”