A new report from the Getting to Zero Coalition and the Global Maritime Forum highlights the need for scalable zero-emission fuels, such as e-ammonia and e-methanol, to meet the sector’s decarbonization targets for 2040. This analysis emphasizes that developing the value chains for these fuels within the next decade is crucial for their commercial viability.
According to the report, dual-fuel ships that operate on liquefied natural gas (LNG) and ammonia are projected to be the most cost-competitive options leading up to the mid-2030s, with ammonia expected to take the lead around 2037. With recently implemented global fuel intensity (GFI) targets and penalties for non-compliance, a framework for long-term investment is emerging. This strategy could be enhanced by providing targeted rewards for early adopters and increasing penalties for those who fail to comply with the new regulations.
The International Maritime Organisation (IMO) has introduced policy measures that aim to drive the shipping industry towards zero-emission fuels, asserting that this transition will only be effective with adequate rewards and penalties. The report employs total cost of ownership (TCO) modelling and insights from over 30 stakeholder interviews, demonstrating that while various compliance pathways exist, stricter GFI regulations will increasingly favor scalable zero-emission fuels. This shift aims to phase out fossil fuel-based solutions.
The TCO analysis indicates that e-fuels have the greatest potential for achieving long-term decarbonization targets. However, immediate adoption and value chain development are essential. Jesse Fahnestock, the Global Maritime Forum’s director of decarbonisation, stated that the sector must act urgently to avoid bottlenecks in decarbonization efforts.
The report further reveals that ammonia is expected to become the most cost-effective fuel by the late 2030s. This forecast relies largely on “blue fuels,” which utilize hydrogen derived from fossil fuels with carbon capture. Even in the absence of incentives, the cost of conventional fuel is projected to climb, making LNG the lowest-cost fuel option from 2030 to 2035. With the potential for carbon capture technology to extend the utility of LNG until 2037, ammonia could emerge as the competitive choice for vessel orders already today.
However, industry stakeholders express concern over regulatory uncertainty and fuel availability, which may push them towards waiting for clearer options. Many are currently focusing on short-term solutions, such as biofuels or LNG, rather than investing in zero-emission technologies. Nevertheless, some are considering long-term investments, including dual-fuel vessels, in anticipation of how to leverage the new regulatory framework.
To successfully promote e-fuels, the IMO must offer well-defined rewards and a robust regulatory structure. The existing policy architecture outlines a tiered GFI system covering 2028-2040, creating various compliance levels for vessels. Companies can opt to switch fuels, pay penalties, or purchase surplus units from compliant vessels. While awards for using zero-emission fuels will encourage compliance, the specifics are still pending.
In summary, while the IMO has established a foundational regulatory structure for the industry’s transition towards zero-emission fuels, more adjustments are essential to foster early adoption and secure long-term investments that align with the shipping sector’s decarbonization goals.
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