Shipping Industry Seeks Practical Fuels to Meet Emission Standards

June 02, 2025

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(Rystad Energy/OilPrice.com) • Biofuels are a viable option for the shipping industry to meet emission standards, but current production capacity is insufficient to meet demand, particularly for sustainable second-generation biofuels.

While future fuel technologies like ammonia and methanol face challenges, biofuels offer a more practical short-term solution, though shipowners must secure reliable supplies to remain competitive.
Bio-LNG is identified as a cheaper alternative to biodiesel, especially with government support, making it a promising fuel for the shipping industry's transition to cleaner energy.

The shipping industry’s target of net-zero carbon emissions has boosted demand for biofuels, which are compatible with existing ship engines and therefore can be adopted relatively easily. However, Rystad Energy analysis shows that the capacity to produce biofuels—such as biodiesel and bio-liquefied natural gas (bio-LNG)—is not keeping up. Unconstrained biodiesel demand exceeds total supply and the outlook for bio-LNG is equally restricted, in both allocation and production.

Biofuels could be a more cost-effective alternative to traditional marine fuels such as very low-sulfur fuel oil (VLSFO), particularly when aligned with the low-emission thresholds established by the International Maritime Organization’s Greenhouse Gas Fuel Intensity (GFI) standard. In a scenario without supply constraints, global demand for biodiesel in shipping could exceed 140 million tonnes of fuel oil equivalent by 2028. However, even under ideal conditions, total biofuel production capacity is expected to peak at around 120 million tonnes. When sustainability criteria are applied—prioritizing cleaner, second-generation biofuels—this potential supply drops sharply to just 40 million tonnes. Taking into account production risks, actual output levels, and competition from other sectors, the volume of biofuels realistically available for shipping diminishes even further.

As new technologies emerge and regulations tighten, the pressure on the shipping industry to innovate and invest wisely has never been greater. That urgency sets the stage for the upcoming Rystad Talks Energy: Full Steam Ahead – LNG, Biofuels, and the Future of Maritime Energy on 28 May (WATCH recorded presentation). Rystad Energy CEO Jarand Rystad will join DNV Maritime CEO Knut Ørbeck-Nilssen to explore how maritime leaders can chart a course toward net-zero emissions. With global shipping racing to decarbonize, the conversation will focus on the search for cleaner, scalable fuel solutions that can power the industry’s future.

Demand for biodiesel, if unrestricted, outstrips the total supply. The situation with bio-LNG is also constrained, with challenges for both production and allocation capacity. While projected demand is a relatively modest at 16 million tonnes in fuel oil equivalent by 2028, the apparent surplus in supply is misleading. Over 84% of global biomethane is already committed to electricity generation, with an additional 10% allocated to road transport. This leaves only 6% available for all other sectors, including maritime, making actual access far more limited than the numbers suggest.

Junlin Yu, Senior Data Analyst, Shipping, Rystad Energy

This is a supply crunch that the shipping industry cannot afford to overlook. While future-facing fuels such as ammonia and methanol offer long-term promise, they come with high costs and infrastructure challenges, leaving many shipowners hesitant and waiting for clearer market signals.

In the meantime, biofuels stand out as the most practical route to meet the IMO’s tightening emissions standards. However, this transitional solution is fragile. Without careful planning and proactive action, the bridge to compliance could quickly erode.

Biodiesel and bio-LNG can be cost-effective under the IMO Net-Zero Framework, but only if their lifecycle greenhouse gas (GHG) emissions are low enough to qualify for IMO incentives. However, demand for bio-LNG in maritime transport far exceeds current production, revealing a significant supply gap. To navigate the changing regulatory landscape, shipowners must act quickly, securing dependable biofuel supplies and aligning with GFI targets. In the race for cleaner shipping, success hinges not just on choosing the right fuel, but on securing it ahead of competitors.

Junlin Yu, Senior Data Analyst, Shipping, Rystad Energy

Biofuels are currently more cost-effective than traditional marine fuels, especially when they meet strict low-carbon standards. While blending biofuels at 30% or 50% can help meet emission targets in the short term, fully switching to 100% low-emission biofuels offers the greatest long-term savings and rewards. Notably, bio-LNG stands out as a cheaper option than biodiesel, particularly when supported by government subsidies, making it a promising fuel for the shipping industry’s transition to cleaner energy.

By Rystad Energy READ MORE

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Why Shipping’s Low-Carbon Future Relies More on Batteries & Biofuels Than Methanol (Clean Technica)

Excerpt from Clean Technica: Analyzing shipping decarbonization through 2100, my (Michael Barnard) projections see an aggressive shift away from traditional fossil fuels. These scenarios anticipate near-complete displacement of heavy fuel oils by biomoass-derived alternatives and electrification. The broader decarbonization trajectory indicates a gradual but definitive movement toward low-carbon and zero-emission shipping, driven primarily by intensifying regulatory frameworks, carbon pricing, and market expectations.

Methanol-fueled ships have recently captured significant attention within the maritime industry. 60 dual-fuel methanol ships are currently in operation and approximately 340 dual-fuel vessels are on order globally as of mid-2025, reflecting rapid and aggressive adoption among major shipping companies, particularly container ship operators such as Maersk, CMA CGM, COSCO, ONE, and Evergreen. These dual-fuel vessels represent a strategic hedge by shipowners and operators against future carbon pricing risks and stricter emissions regulations. However, the high enthusiasm seen in vessel orders contrasts sharply with the sobering reality of methanol fuel supply.

Low-carbon methanol—either biomethanol produced from renewable biomass or e-methanol synthesized from captured carbon dioxide and renewable hydrogen—is today scarcely available and extremely costly. Current global renewable methanol production is negligible, less than 1% of total methanol production, and substantially insufficient to support the burgeoning methanol-fleet. With biomethanol prices typically between $1,200 and $1,500 per ton, and e-methanol even higher, around $1,500 to $2,000 per ton, the economic challenge of large-scale adoption is pronounced. It’s important to note that methanol has only 45% of the energy density of VLSFO, so the prices per kilometer steamed are much higher than a per ton cost assessment would suggest. As a result, methanol-capable ships, despite their potential, presently consume predominantly fossil-based methanol or conventional marine fuels.

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As I worked out a couple of years ago, fossil-derived methanol isn’t remotely a climate solution, although it is a pollution solution. As 99.5% of methanol is derived from natural gas or coal gas, the average carbon intensity is almost three times that of VLSFO or marine diesel. Natural gas derived methanol is only double the emissions, but that still has zero merit. The methanol industry has long been using much better tank-to-wake numbers instead of appropriate well-to-wake numbers to pretend it’s a clean fuel. The IMO only adopted well-to-wake requirements for decarbonization assessments in 2021, something the methanol and ammonia industries exploited, along with the global delusion that green hydrogen would be cheap, to pretend that they were the right choices.

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Ports capable of supplying renewable methanol remain few, with operators encountering complex logistical and safety considerations that complicate rapid deployment. Early adopters, notably Maersk, have had to invest considerable effort and resources into arranging limited, high-cost supplies of renewable methanol for initial voyages, highlighting the nascent state of bunkering infrastructure and the prohibitive costs associated with these pioneering endeavors.

By comparison, biodiesel and hydrotreated vegetable oil (HVO) are notably pragmatic and immediately deployable alternatives.

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Furthermore, biodiesel and HVO prices are considerably lower and more predictable than those for low-carbon methanol, typically around $1,000 to $1,500 per ton.

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I’ve had the conversation with the leaders of the US biodiesel association, and they are looking closely at maritime shipping as their next growth market.

That drop in nature includes bunkering facilities in ports. Blends of VLSFO and biodiesel/HVO are available in some parts today, with exactly the same short side tanks and bunkering processes delivering the blends instead of pure VLSFO. By contrast, methanol requires new tanks, new processes, and new pumping equipment, or extensive modifications to existing equipment due to its much more corrosive nature.

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There’s an argument to be made here that while ships can run on methanol, airplanes can’t, and that the heavier molecules in feedstocks easily transformed into HVO, biodiesel or biokerosene must be preserved for aviation. Paul Martin and I have had that discussion a few times. However, as there are so many pathways to biofuels of all types, including human poop to jet fuel, I’m content to let this one play out in the marketplace.

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For larger, ocean-going ships with extended range requirements, full battery-electric propulsion remains impractical in the short to medium term due to battery size, weight, and cost constraints. However, hybrid propulsion systems that integrate batteries with biodiesel or HVO engines represent a powerful interim solution.

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As a note for ammonia advocates, I remain astounded that anyone is considering the liquid as a shipping fuel. Mariners can tell what engines are burning because of the smell in the engine room due to slippage. Ammonia fumes are incredibly dangerous to humans, often lethal. When ammonia mixes with water — note, these are ships we are talking about — ammonia turns into a highly corrosive gas which if inhaled destroys lungs. After that it turns into something that’s just bad for human health. As one European public health official pointed out, if there were a major bunkering spill, tens of thousands of people in port cities would die. Then there’s the danger to marine life. Yes, we have ammonia tankers, but only a few dozen, and they are dealt with in separate areas of ports with extreme care.

Ammonia is a great fertilizer, and using it that way maximizes crop yields which can then be used for biofuels. Using a ton of ammonia to grow crops rather than burning it yields roughly forty-times more usable fuel energy (and around thirty times the mass of liquid fuel). Low-carbon ammonia will be expensive ammonia and it can’t be made from biomass, so it will be in the same price range as e-methanol, far out of the running. READ MORE