New Study Suggests EU Regulations Will Make Economic Case for Methanol in Shipping

by Sam Chambers (Splash 247) A new white paper prepared for the Methanol Institute by Dr Jeroen Dierickx, an energy and fuel expert at iDefossilise, concludes that the FuelEU Maritime Regulation and EU Emissions Trading System (ETS) will create a level playing field for bio- and e-methanol, making them economically competitive compared to fossil marine fuels.

Under the EU’s Fit for 55 regulatory package, vessel operators are incentivised to transition to these sustainable fuels through significant penalties levied on continued fossil fuel use. For fuel producers, the regulations offer a stable, long-term framework from 2024 to 2050, paving the way for secure investment opportunities in the maritime sector.

The FuelEU Maritime Regulation sets targets for reducing greenhouse gas emissions from the maritime sector and imposes increasingly severe penalties on fossil fuels such as very low sulfur fuel oil (VLSFO). Non-compliance costs for vessel owners will escalate from €39 per ton in 2025 to €1,997 per ton by 2050, the study claims.

Every five years, the FuelEU Maritime greenhouse gas emission targets increase, from 2% in 2025 to 80% by 2050. These targets can be met by blending bio- or e-methanol with conventional natural-gas based methanol, increasing from 14% bio-methanol and 7% e-methanol in 2025 to 28% bio-methanol and 25% e-methanol in 2035, and fully 100% bio-methanol and 91% e-methanol by 2050, the study forecasts.

Gregory Dolan, CEO of the Methanol Institute, stated: “The study confirms the profound impact of regulations on the demand for methanol as a marine fuel. The findings indicate that the emerging EU regulatory framework is robust enough to enhance the business case for low-carbon and renewable methanol fuels and fuel blends, supporting the transition to a sustainable maritime industry.’’ READ MORE

Excerpt from Methanol Insitute: This white paper presents an economic analysis of bio-methanol and e-methanol as a marine fuel within the frameworks of the FuelEU Maritime regulation and the recently applied extension of EU’s Emissions Trading System (ETS) to maritime transport. It aims to evaluate the economic viability of bio- and e-methanol under
these regulations compared to the continued use of fossil diesel, with VLSFO used as reference, and to provide
an estimate of their value in relation to these regulatory frameworks.

Structure of the white paper
The white paper is divided into four sections:
1. Regulatory Landscape: A brief review of FuelEU Maritime and the EU ETS extension to maritime transport
2. Non-Compliance Costs: Calculation of additional regulatory costs under FuelEU Maritime and EU ETS for using VLSFO.
3. Compliance Pathways: Explanation of the pathways to achieve FuelEU Maritime compliance with sustainable methanol.
4. Economic Value of Methanol: Calculation of the maximum price of bio- and e-methanol to achieve cost parity with VLSFO including its non-compliance costs. READ MORE