‘Green’ marine fuels could cost less than oil bunkers from 2035: Wartsila

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Sustainable marine fuels could become cheaper than conventional, oil-based bunkers from 2035 when greenhouse gas emissions regulations like carbon pricing mechanisms are taken into account, Finnish technology firm Wartsila said March 21.

The EU has extended its Emissions Trading System to include maritime transportation from this year, with 40% coverage of emissions from shipping companies in voyages involving the bloc this year, before the ratio rises to 70% in 2025 and 100% from 2026.

Platts, part of S&P Global Commodity Insights, last assessed the EUA contract for December delivery at Eur60.62/mtCO2e ($66.14/mtCO2e) on March 20, not far from a 31-month low of Eur52.36/mtCo2e seen on Feb. 23. But many market participants expect EUA prices to set a long-term upward trajectory, with the EU in need of tightening its supply to meet its climate neutrality goal by 2050.

Brussels has also planned to usher in FuelEU Maritime on the GHG intensity on marine energy in EU-related trades from next year, with the regulation set to tighten in the coming decades. Firms not complying will be fined.

While sustainable fuels would still be three to five times more expensive than today’s conventional fuels in 2030, the ETS and FuelEU Maritime could cause the cost of conventional fuels to more than double by the end of this decade, Wartsila said in a research paper.

Platts assessed the bunker price for 0.5%-sulfur fuel oil, the prevalent bunker choice also known as very low sulfur fuel oil, at $585/mt in Rotterdam on March 20.

With regulations taken into consideration, the costs of low-carbon methanol, ammonia, compressed hydrogen, and marine battery could be 60%-80% of VLSFO in 2035, according to Wartsila’s research.

In the company’s forecast, biofuels like biodiesel, biomethanol, biomethane and bioethanol as marine fuels could see large growth in the 2030s.

Then, blue fuels like ammonia produced from fossil fuels with carbon capture and storage technology would be scaled up before synesthetic fuels based on renewable hydrogen, like “green” ammonia, arrive at significant volumes from the late 2030s, according to Wartsila.

Decarbonization targets

The International Maritime Organization last July agreed to tighten decarbonization targets and said life-cycle GHG from international shipping should fall by 20%-30% by 2030 and by 70%-80% by 2040 against 2008 levels before reaching net zero close to 2050.

Cutting vessel speeds by 30% and implementing “all available energy efficiency measures” could reduce the sector’s energy demand by 15%-27%, but full decarbonization would require 270 million mt of fuel oil equivalent of alternative fuels, Wartsila estimates.

“Achieving net zero in shipping by 2050 will require all the tools in the toolbox, including sustainable fuels,” said Roger Holm, president of Wartsila’s marine division.

Source: Platts