European Green Shipping Fuel Projects Face Uncertainty, Analysis Reveals

A recent analysis by Transport & Environment (T&E) indicates that two-thirds of European green shipping fuel projects are at risk due to financial reluctance from fuel suppliers amidst a lack of demand guarantees. This comprehensive mapping underscores the potential for nearly 4% of European shipping to operate on green e-fuels by 2030, yet reveals that the majority of these projects may not materialize within this decade, jeopardising Europe’s climate goals and associated job creation.

Inesa Ulichina, a shipping officer at T&E, highlighted the burgeoning interest in hydrogen projects across Europe, emphasising their potential to decarbonise challenging sectors like shipping and create numerous employment opportunities. However, she cautioned that without greater certainty, this opportunity might be squandered.

The T&E study identifies a minimum of 17 projects across Europe designated to supply hydrogen-based e-fuels for ships. If operational, these projects could satisfy nearly 4% of the EU’s shipping energy demand by 2030. Additionally, T&E mapped 44 other hydrogen projects in Europe that could potentially provide green fuels for ships, though many developers are considering other hydrogen-demanding industries.

While these projects could easily meet the European Union’s target of 2% green e-fuels by 2034, most have yet to secure funding, and no shipping-dedicated projects are currently operational. The primary hurdles cited by fuel producers are buyer uncertainty and investment security, posing significant risks to millions of tonnes of green fuels and thousands of skilled jobs. Globally, green shipping is projected to create approximately 4 million new jobs by 2050.

Geographically, Denmark accounts for over half of the planned hydrogen volumes within the 61 projects mapped by T&E. Spain leads in terms of fuels earmarked for shipping, housing a third of the potential fuel supplies. Despite its extensive coastline, the UK has very few projects, and T&E found none in Italy and Greece.

In the long term, e-ammonia appears to be the preferred option, comprising 77% of potential volumes. However, none of these projects have reached a final investment decision to date.

Ulichina remarked on the “chicken and egg” dilemma within the shipping sector, where e-fuels producers await clearer demand signals from ship operators before committing to large investments, while shipping operators wait for these fuels to scale up and become cost-effective before entering off-take agreements. She advocated for EU regulatory measures to ensure an increase in supply and demand for e-fuels, providing investment certainty for both fuel producers and shipping companies.

T&E recommends that EU member states mandate at least 1.2% of shipping fuels to be e-fuels by 2030, aligning with the EU’s green fuels law (RED III). This would secure all currently funded projects and enable more projects to reach final investment decisions. Additionally, revenues from the EU’s carbon market for shipping (ETS) should be utilised to support emerging projects, T&E suggests.

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