A new White Paper prepared for the Methanol Institute 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 the 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.
Gregory Dolan, CEO of the Methanol Institute: ‘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.’
Key findings of the study, which was conducted by Dr Jeroen Dierickx, an energy and fuel expert at iDefossilise, are summarised below.
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Severe penalties on fossil fuels
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 sulphur fuel oil (VLSFO). Non-compliance costs for vessel owners will escalate from EUR 39 per tonne in 2025 to EUR 1997 per tonne by 2050.
Regulatory costs under the EU Emissions Trading Scheme (ETS), which also covers the maritime sector, are phased in from forty per cent in 2024 to 100 per cent in 2026. With a projected market price of EUR 100 for CO2 emission allowances, the additional cost for VLSFO is estimated at EUR 321 per tonne.
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Methanol becomes viable compliance option
To avoid these penalties, vessel owners can use bio- or e-methanol, or blends of fossil and sustainable methanol as viable compliance options and encourage the development of a sustainable methanol supply chain.
The analysis forecasts the average maximum price for bio-methanol to be EUR 1193 per tonne from 2025-2050. For e-methanol, prices are estimated at EUR 2238 per tonne from 2025-2033, decreasing to EUR 1325 per tonne from 2034-2050 when the reward factor for using renewable fuels of non-biological origin (RFNBO) expires in 2034. Including EU ETS costs, these prices rise by EUR 150 per tonne for both fuels.
FuelEU target can be met with methanol blends
Every five years, the FuelEU Maritime greenhouse gas emission targets increase, from two per cent in 2025 to eighty per cent by 2050. These targets can be met by blending bio- or e-methanol with conventional natural-gas based methanol, increasing from fourteen per cent bio-methanol and seven per cent e-methanol in 2025 to 28 per cent bio-methanol and 25 per cent e-methanol in 2035, and fully 100 per cent bio-methanol and 91 per cent e-methanol by 2050.
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Economic potential
Both bio- and e-methanol show significant economic potential under the new regulations. FuelEU and EU ETS are expected to effectively promote the adoption of these sustainable fuels in maritime shipping.
This study marks an important milestone for the maritime sector, providing a clear pathway for companies to align with regulatory frameworks while transitioning to sustainable fuel options. It further provides an investment timeline for producers to align production of conventional and renewable methanol with projected demand.
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