SMAP Explained: How the EU's New ETS Mechanism Would Actually Subsidise Hydrogen Bunkers

The European Commission’s July 2026 proposal to revise the EU Emissions Trading System — COM(2026) 616 — introduces a new mechanism buried in a single new article: Article 3gaa, unofficially called SMAP, for Sustainable Maritime Alternative Propulsion. It’s a pool of up to 110 million ETS allowances, reserved for 2028–2040, designed to reimburse part of the price gap between fossil bunker fuel and cleaner alternatives like hydrogen. On paper it looks like the subsidy hydrogen shipping has been waiting for. In practice, it’s one of three separate mechanisms stacking on the same fuel switch — and the fine print matters more than the headline number.

Three Mechanisms, One Fuel Switch

The easiest mistake to make with SMAP is treating it as the subsidy for hydrogen bunkers. It isn’t — it’s the third of three separate, legally distinct instruments that all touch the same tonne of hydrogen, on three different cost axes.

Stacking these three isn’t double-counting the same euro — they operate on different axes (fuel price gap, carbon allowance cost, compliance penalty avoidance) — but the proposal includes an anti-double-subsidy clause that could still net them down in practice. More on that below.

How SMAP Actually Calculates Your Support

The core formula in Article 3gaa(9):

smapSupport = grossFuelPremium × smapPct × outsideEUFactor

• smapPct — 90% for RFNBO renewable hydrogen (Art. 25 RED III compliant), 80% for low-carbon hydrogen (per the Gas Directive 2024/1788 definition), 55% for biogas and advanced biofuels.
• outsideEUFactor — 0.5 on voyages between an EU port and a non-EU-jurisdiction port; 1.0 for intra-EU/EEA voyages. This alone can halve your allocation for anything but a purely domestic route.
• Bonus adders not modelled below — +5 percentage points for island-Member-State voyages, +10pp for EU/EEA-sourced feedstock, +5pp for zero-emission propulsion fitted in an EU shipyard.

Meanwhile, the avoided-cost side of FuelEU runs on a completely different logic — well-to-wake intensity, not fuel price:

avoidedIntensity  = max(0, GHGI_FOSSIL − GHGI_H2)     // gCO2eq/MJ
avoidedCO2Tonnes  = avoidedIntensity × energy_GJ / 1000 × rewardMultiplier
fueleuAvoided (€) = avoidedCO2Tonnes × complianceRate_perTonneCO2

The fossil reference (91.16 gCO2eq/MJ) comes straight from FuelEU’s 2020 WtW baseline in Annex I. Hydrogen’s own intensity is the number worth scrutinising: 20 gCO2eq/MJ is an assumption, not a regulatory default, and it matters which hydrogen you’re talking about — liquid hydrogen specifically carries extra upstream footprint from liquefaction (boil-off, cryogenic compression) that compressed gaseous hydrogen doesn’t. RFNBO hydrogen gets a 2× reward multiplier under Article 22 (in force to 31 December 2033), which doubles how much of the switched energy counts toward closing a compliance deficit — it doesn’t change the underlying price gap, only the size of the credit.

One modelling choice worth flagging explicitly: the compliance value here is priced at a market compliance rate (a working default of €200/tCO2, roughly where inter-ship pooling has historically cleared) rather than the €2,400/t VLSFOeq statutory penalty ceiling. The ceiling is a worst-case deterrent for a shipowner with zero compliant fuel and no pooling partners — not a realistic proxy for what avoiding a shortfall is typically worth on the market.

Worked Example: 1,500 t LH2/Year

Running these formulas for a vessel bunkering 1,500 tonnes of liquid hydrogen annually — a plausible figure for a shortsea LH2-fuelled bulk carrier — produces a cost bridge with four moving parts: the gross premium (LH2 minus fossil-equivalent fuel cost), then three successive reductions from the ETS zero-factor, FuelEU’s avoided compliance cost, and SMAP’s direct reimbursement of what’s left.

The output is genuinely sensitive to inputs that are themselves uncertain a year or more before the voyage: the delivered LH2 price, the prevailing EUA price, and the FuelEU compliance rate all move the net number substantially. That sensitivity is the whole point of building this as a calculator rather than quoting a single figure — a fixed number would misrepresent how contingent the real support is.

Sizing the Constraint: the Pool Is Not Unlimited

A single vessel’s SMAP ask, run through the formula above, tends to look small relative to the pool — and that’s exactly the trap. The indicative average annual pool value works out roughly like this:

poolAnnualValue (€) ≈ (110,000,000 allowances / 13 years) × EUA_price
yourShareOfPool (%)  = smapSupport / poolAnnualValue × 100

At a EUA price around €90 and the 1,500 t/year example above, the pool’s indicative annual value comes out around €760 million, with a single vessel’s ask sitting at a few tenths of a percent of that. The 13-year even split is a simplification for illustration — Article 3gaa(1) caps the whole period at 110 million allowances but doesn’t specify an annual tranche, so real yearly availability could be front- or back-loaded in ways the proposal doesn’t yet fix.

The reason a single ship’s number “looks too good” is that the cap constrains the aggregate EU fleet, not one vessel. The real risk only shows up once you imagine thousands of shipping companies applying in the same year — which is precisely the scenario the proposal’s own rationing mechanism exists to handle.

Six Reasons SMAP Is Not Free Money

1. Hard cap, EU-wide, whole period. 110 million allowances total, 2028–2040 (Art. 3gaa(1)) — a shared pool, not a per-vessel entitlement.
2. Uniform pro-rata cut on oversubscription. If demand in a given year exceeds that year’s availability, allocations are “reduced in a uniform manner for all shipping companies concerned” (Art. 3gaa(11)) — a flat percentage haircut applied to everyone, which does nothing to favour smaller or more ambitious converters over large ones running a token percentage of hydrogen.
3. Origin requirements. Under Article 3gaa(6), the fuel must be produced in the Union, in a third country with an ETS linked to the EU ETS, or in a country receiving support under Article 25b — otherwise the allocation is zero, barring a green-corridor derogation.
4. Anti-double-subsidy clause. Article 3gaa(12) lets the Commission net SMAP down against support already received from other national, EU, or international schemes. It’s not settled in the text whether this could extend to netting against the ETS zero-factor / FuelEU stacking described above — a real interpretive risk for anyone counting all three layers as independently additive.
5. Allowances, not cash. You apply annually based on verified prior-year usage and monetise at whatever EUA price prevails then — market and timing risk is baked directly into the payout.
6. Still a proposal. Nothing here is adopted law. The 110M figure and the 90/80/55% percentages are exactly the kind of numbers that typically get trimmed during Council and Parliament negotiation.

Structural Problems Worth Raising in Consultation

Beyond the mechanics, a few design choices look like they’ll bite specific categories of operator harder than others:

• No economies-of-scale balancing. Allocation is based on absolute tonnes of sustainable fuel used (Art. 3gaa(10)), not the percentage of a fleet’s total fuel mix switched. A large containership converting 10% of a huge fuel base can out-claim a small operator running 100% hydrogen, purely on volume — and the uniform pro-rata cut preserves that bias rather than correcting it.
• Retrospective, not upfront. Article 3gaa(10) means you apply the year after fuel use, based on verified prior-year consumption. The full premium is self-financed for at least a year before any support arrives — a real working-capital cost that a small operator feels more than a major line.
• Reference price published after the fact. Under Article 3gaa(13)(a), the Commission publishes the average fossil/sustainable-fuel price differential annually, for the previous year — not your actual contracted price. Whether you over- or under-recover depends on how your contract price compares to a number you cannot know at the point you sign it.
• Not a Contract-for-Difference. Unlike CCfDs already used elsewhere in EU industrial decarbonisation policy — steel, cement — which lock in a guaranteed price differential upfront via auction, SMAP is ex-post reimbursement. Both price-reference risk and volume-cut risk sit with the shipping company, not the state. A concrete ask for consultation: convert SMAP to an auctioned CCfD-style structure, or at minimum publish the reference price ex-ante rather than in arrears.

Taken together, these mean SMAP works best as a partial hedge you can plan around directionally, not a number you can put in a fixed-price charter quote a year in advance.

The Bottom Line

SMAP is a genuine addition to the EU’s maritime decarbonisation toolkit — the first mechanism in this space that functions as an actual price-gap subsidy rather than a zero-rating or a compliance credit. But it’s a finite, retrospective, pro-rated subsidy with an unresolved interaction with the two mechanisms it stacks alongside, not the guaranteed price floor that a CCfD would provide. For anyone building a business case around it — whether for a newbuild, a bunkering investment, or a charter negotiation — the honest framing is: model it as a partial, uncertain offset to the fuel premium, run the sensitivity on EUA price and reference-price timing, and don’t commit fixed pricing to a counterparty based on the headline 90%/80% figures alone.

The draft is open for the normal EU consultation process ahead of Council and Parliament negotiation, expected to run into roughly Q1 2027. The structural issues above — the retrospective payout, the published-after-the-fact reference price, and the absence of a CCfD-style upfront guarantee — are exactly the kind of design details industry input can still shift before the text is finalised.

Sources

• European Commission, COM(2026) 616 final, 17 July 2026 — proposal amending Directive 2003/87/EC (EU ETS), introducing new Article 3gaa
• Regulation (EU) 2023/1805 (FuelEU Maritime), Articles 20–22
• Directive (EU) 2024/1788 (Gas Directive), Article 2(11)/(13) — low-carbon hydrogen definition
• Directive (EU) 2018/2001 (RED III), Article 25 — RFNBO compliance criteria

This analysis is based on the draft text of COM(2026) 616 as of publication and is illustrative, not a compliance calculation. The 110M-allowance cap, percentages, and reference-price mechanics are all subject to change during Council/Parliament negotiation — verify against the Commission’s adopted text and published reference prices before relying on these figures for a real transaction.