A recent study from the Mærsk Mc-Kinney Møller Centre for Zero Carbon Shipping highlights worries about the industry’s ability to secure enough renewable fuels, especially biodiesel, to fulfill the FuelEU decarbonization targets.
The analysis indicates that to achieve the 2025 FuelEU targets, the industry needs to cut 2.4 million tonnes of CO2eq. The current maritime fuel mix, including LNG and biodiesel, can potentially achieve up to 90% of this reduction. Although biodiesel is often the most cost-effective option in the short term, future prices remain uncertain due to feedstock limitations and competition from other sectors.
How much low-carbon fuel is currently being used?
Biodiesel, which can be mixed with fuel oil and used in traditional engines, is becoming more popular among companies to comply with regulatory standards and achieve voluntary decarbonization targets. Additionally, fossil LNG offers some emissions reductions, though limited, for ships designed to use this fuel.
There are differing opinions on whether the supply of biodiesel will meet the demand. Experts we consulted pointed out that EU ports may struggle to secure and deliver 600,000 tonnes of biodiesel in 2025 due to competition from other industries. Additionally, concerns about the quality of used cooking oil, the main feedstock for biodiesel, could further constrain the market.
However, the strain on supply could be alleviated as other ports increase volumes to meet demand. For example, Singapore sold roughly 500,000 tonnes of bio-blended fuel oil in 2023, and the Spanish port of Algeciras-Gibraltar started offering a B24 blend in 2023. These developments suggest ports may be able to meet rising demand.
Another consideration is that a significant portion of the biodiesel bunkered in Rotterdam is marketed to customers as emission reductions. Additionality guidelines will likely prevent companies from using biofuel sold to cargo owners as emission reductions towards FuelEU compliance.
As informed, if companies continue to use biodiesel and sell the emission reductions to customers, then more volumes of biodiesel will be needed to meet both voluntary emission reductions targets as well as FuelEU compliance targets. High demand for both FuelEU compliance and voluntary emission reduction markets could strain supply.
