Sustainable shipping fuels can reach cost parity with fossil fuels by 2035 with decisive policy, says Wärtsilä
Wärtsilä has launched a report that has found that sustainable shipping fuels could reach cost parity with fossil fuels as early as 2035 with the help of decisive emissions policy such as carbon taxes and emissions limits.
The report, titled ‘Sustainable fuels for shipping by 2050 – the 3 key elements of success’, revealed that the EU Emissions Trading Scheme (ETS) and FuelEU Maritime Initiative (FEUM) will see the cost of using fossil fuels more than double by 2030. By 2035, they will close the price gap between fossil fuels and sustainable fuels for the very first time, the report states.
Transporting 80% of world trade, shipping is the engine room of the global economy. However, despite being the most efficient and environmental way to transport goods, it emits 2% of global emissions, equivalent to the annual emissions of Japan. Without action, this could increase by more than 45% by 2050.
In 2023, the International Maritime Organization (IMO) set a target of achieving net-zero emissions by 2050. Existing decarbonization solutions, such as fuel efficiency measures, could cut up to 27% of emissions. Wärtsilä’s report argued that sustainable fuels will be a critical step in eliminating the remaining 73% but radical action is needed to scale them.
According to the research, 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.
Wärtsilä has produced new modeling that shows a timeline of which fuels are likely to become widely available on a global scale, when 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.
Roger Holm, president of Wärtsilä marine and executive vice president at Wärtsilä Corporation, said, “Achieving net zero in shipping by 2050 will require all the tools in the toolbox, including sustainable fuels. As an industry, we must focus on coordinating action across policymakers, industry and individual operators to bring about the broad system change required to quickly and affordably produce a mix of sustainable fuels. 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.”
Decisive policy
Wärtsilä’s modeling shows sustainable fuels will be 3-5 times more expensive than today’s fossil fuels in 2030. As ETS and FEUM show, policy is key to closing the price gap. The report argues that policymakers should: set an internationally agreed science-based pathway for phasing out fossil fuels from the marine sector, in line with IMO targets; adopt a global industry standard for marine fuel carbon pricing; and increase global collaboration between governments on the innovation and infrastructure necessary to deliver sustainable fuels at scale worldwide.
Industry collaboration
The sector must collaborate with stakeholders from inside and outside shipping. The report calls on the industry to: initiate sector-wide procurement agreements to pool demand from multiple shipping operators; convene with leaders in aviation, heavy transportation and industry to establish a globally recognized framework for the production and allocation of sustainable fuels; establish an industry-wide knowledge hub for the purpose of sharing 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 Corporation, which made a 5-10% efficiency gain through its Service Power Upgrade Program, could cut its fleet-wide fuel costs by as much as US$750m per year in 2030. All operators can benefit from improving the efficiency of their vessels – the technology is readily available today.
Holm added, “If there is one takeaway from our report, it is that smaller operators need not feel powerless. They have a major role in accelerating toward 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.”
Investing in fuel flexibility was found to be the most financially viable way to avoid the risk of stranded assets. Wärtsilä has been developing multiple fuel options. Most recently, Wärtsilä launched the first commercially available 4-stroke engine for ammonia fuel, which can immediately reduce emissions by over 70%, compared to diesel.
The report provides a roadmap for the future of sustainable fuels, identifying how the industry can more rapidly and affordably scale these fuels and achieve full decarbonization by mid-century – within the lifetime of just a single vessel.
In related news, Wärtsilä recently signed a lifecycle agreement with UK-based P&O Ferries to support two vessels – the M/V Pioneer and the M/V Liberté – for five years. Click here to read the full story.
