Study by Finnish OEM and technology group says EU ETS and FuelEU Maritime will close price gap between fuel types and create "policy blueprint"
Wärtsilä has undertaken analysis which it says positions policy as the keystone in closing the price gap between fossil and non-fossil fuels.
Called Sustainable fuels for shipping by 2050 – the 3 key elements of success, the report says the EU Emissions Trading Scheme (ETS) and the FuelEU Maritime Initiative will see the cost of using fossil fuels more than double by 2030 to make sustainable fuels more competitive.
"By 2035, the joint policies will close the price gap between fossil fuels and sustainable fuels for the very first time," Wärtsilä asserted.
With the United Nations’ International Maritime Organization (IMO) having agreed on a target for shipping to reach net-zero emissions by or around 2050, Wärtsilä said existing decarbonisation solutions, such as fuel efficiency measures, could cut up to 27% of industry emissions.
Wärtsilä produced modelling showing a timeline of when various sustainable fuels are likely to become available on a global scale, and at what cost. To accelerate this timeline, the report argues that decisive policy implementation, industry collaboration and individual operator action must coalesce to scale the production of these fuels.
Wärtsilä’s report argues for "radical action" to scale production and access to the sustainable fuels the company says will be needed to cut the remainder of emissions.
"The industry suffers from a ’chicken and egg’ challenge – shipowners won’t commit to a fuel today that is expensive, only produced in small quantities, and may be usurped by another fuel that scales faster and more affordably. Meanwhile, it is difficult for suppliers to scale production without clear demand signals," the company said.
Wärtsilä Marine president Roger Holm said, "Policy in Europe is showing just how impactful action at the international level can be, closing the cost gap between fossil- and low-carbon fuels for the first time.”
In addition to counselling ship operators to invest in fuel flexibility as the most financially viable way to avoid the risk of stranded assets, Wärtsilä has identified in its report a set of actions for both policy-makers and industry players.
Below is an excerpt from Wärtsilä’s findings:
Wärtsilä’s modelling shows sustainable fuels will be three-to-five times more expensive than today’s fossil fuels in 2030. As ETS and FuelEU Maritime show, policy is key to closing the price gap.
Policy-makers must:
Maximise certainty: set an internationally agreed science-based pathway for phasing out fossil fuels from the marine sector, in line with IMO targets.
Boost cost competitiveness: adopt a global industry standard for marine fuel carbon pricing.
Collaborate: increase global collaboration between governments on the innovation and infrastructure necessary to deliver sustainable fuels at scale worldwide.
Industry must:
Collaborate: the sector must collaborate with stakeholders from inside and outside shipping. The report calls on industry to:
Pool buying power: initiate sectorwide procurement agreements to pool demand from multiple shipping operators.
Collaborate with other sectors: convene with leaders in aviation, heavy transport and industry to establish a globally recognised framework for the production and allocation of sustainable fuels.
Share skills: establish an industrywide knowledge hub to share expertise, skills and insights.
Individual actions: every euro an operator saves in fuel costs at today’s prices, could be worth three-to-five times that by 2030. That means companies such as Carnival Corp, which made a 5-10% efficiency gain through its Service Power Upgrade Program, could cut its fleetwide fuel costs by as much as US$750M annually in 2030. All operators can benefit from improving the efficiency of their vessels – the technology is readily available today.
Mr Holm said, “If there is one takeaway from our report, it is that smaller operators need not feel powerless. They have a major role in accelerating towards net-zero emissions shipping. Taking steps to improve fuel efficiency and invest in fuel flexibility can deliver immediate returns, reducing both emissions and operating costs. But action must be swift – we have the lifecycle of just a single vessel to get this right.”
Riviera Maritime Media’s Maritime Decarbonisation Conference, Europe 2024 will be held in Amsterdam, 24 September 2024, click here for more information on this industry-leading event
© 2023 Riviera Maritime Media Ltd.