The European Commission was wrong to let LNG-fuelled ships qualify as green investments without setting any limit on the methane their engines let slip, Europe's General Court ruled on 30 September.
Under the EU's sustainable-finance rules, buying, financing, chartering or operating an LNG-fuelled ship can count as a green investment from 1 January 2026 where zero-emission operation is not feasible. The ship must be able to run on zero-emission or renewable fuels, beat the IMO's energy-efficiency design standard by 20 percentage points and be able to plug in at berth. It must also "demonstrate the use of state-of-the-art measures and technologies to mitigate methane slippage emissions". No figure is attached to that last condition. Judges found the Commission's defence of the omission contradictory: it described the safeguard as qualitative, while acknowledging that compliance would in practice be checked against the methane slippage thresholds in the FuelEU Maritime Regulation and against guidelines still being drafted (see attached file).
"If verification of compliance with a technical screening criterion necessitates ensuring that certain emissions thresholds are complied with, that criterion must either contain those thresholds or refer expressly to a standard or set of rules containing those thresholds," the judgment reads. The surrounding rules "may change or may not be sufficiently clear as to the thresholds to be observed", judges noted, and the gap "seems rather to result from a scheduling issue", as the FuelEU Maritime Regulation was adopted after the shipping criteria.
The Commission had argued that the existing rules already controlled methane from ships: FuelEU Maritime sets default emission factors for methane slippage, and the extension of emissions trading to shipping prices emissions on a CO2-equivalent basis. It also maintained that suitable technologies were well described in the literature and that operators could obtain them from engine manufacturers. On that last point the court agreed, finding no need to define "state-of-the-art" measures in the text.
The three applicants, Dryade of Brussels, Fossielvrij NL of Amsterdam and Protect Our Winters Austria, lost on every other point. Their arguments that the shipping criteria ignored the life-cycle emissions of LNG and risked locking investment into LNG-fuelled tonnage were thrown out as inadmissible, because they had not been raised in the original request for review or had been raised in support of a different complaint.
Judges also rejected the claim that the 20-point efficiency margin was too lax. The Commission had calculated that roughly 4% of the 8,387 ships with a reported design-efficiency value met it. Transitional activities need only perform substantially better than the sector average, not match its best-performing ships, the court held, and the applicants had argued only that the criteria were "not sufficiently ambitious" rather than that they were unsuitable for reducing greenhouse gas emissions.
The NGOs' challenge to the parallel criteria for aircraft manufacturing, leasing and air transport failed in its entirety.
The court annulled the Commission's June 2024 rejection of the applicants' request for review only in so far as it found a methane slippage threshold unnecessary. The shipping criteria themselves were not annulled. Each party will bear its own costs. The ruling can be appealed.
The Commission acknowledged in 2021, in reply to a parliamentary question, that LNG from fossil sources had "limited gains in terms of greenhouse gases".
See also: GHG benefits from LNG-as-fuel are 'limited', European Commission admits
See also: Emissions: EC pushing well-to-wake in IMO, but not in some of its own greenhouse gas laws