A research paper published by clean energy specialist Longspur Capital argued that the strict carbon emission regulations introduced by the European Union for the maritime sector could make fossil fuels more expensive than alternative fuels in the near future.
One of the schemes introduced by the EU is an Emission Trading System (ETS), which will be applicable as of 2024. The EU ETS is a cap-and-trade system that aims to limit GHG emissions for certain sectors of the economy.
According to classification society and sustainability expert DNV, “the cost of purchasing allowances under the EU ETS can be a significant expense for shipping companies.” DNV believes the scheme is “likely to have implications for pricing and other terms of contractual agreements between parties across the value chain.”
In addition, the EU plans to tax high-emission marine fuels under the Energy Taxation Directive and impose significant emission penalties under the FuelEU Maritime Initiative, writes Journal of Commerce (JOC).
The Longspur Capital also highlighted that methanol has so far provided the most practical way to comply with the strict emission regulations, JOC added.
“There is a strong move among ship owners to address decarbonization, and methanol is emerging as a key solution,” Adam Forsyth, head of research at Longspur, said in the report. “Regulatory developments from the IMO and EU are raising low-carbon shipping up the agenda and methanol is seeing strong interest, with over 100 methanol-fuelled vessels now on the water or on order.”
More regulations are expected to come into play in the next few years by the International Maritime Organisation (IMO). For example, as of May 2025 the Mediterranean will be an Emission Control Area (ECA), and vessels will have to search for alternatives to sulfur-emitting fuels for their voyages in the region. In addition, the IMO will impose more energy efficiency requirements with an aim to push vessel owners to make their ships more energy efficient.
“These changes could make existing maritime fuels more costly than low carbon alternatives as early as 2025,” Forsyth adds in the report.
