The EU can catalyze shipping decarbonization this decade

As negotiations on FuelEU Maritime and EU Emission Trading System (ETS) enter the last phase, we are calling on EU policymakers to raise the climate ambition in these policy proposals and explicitly incentivize the production and use of zero emission fuels made from net-zero energy sources which include green and blue hydrogen, ammonia, methanol, and sustainable biofuels.

October 17 2022

Incentivizing the production and use of zero emission fuels this decade is critical if our ambition of having a global maritime industry run solely on net-zero emission fuels by 2050 is to be achieved. This 2050 ambition is shared by more than 240 shipping stakeholders that have signed the Getting to Zero Coalition’s Call to Action for Shipping Decarbonization as well as many countries and other organizations. But having a bold 2050 ambition is not enough. We need clear, short-term targets and the concrete actions that will take us there.

In the short term, sustainable biofuels will be an important part of the transition, but to achieve the long-term targets, we will need scalable zero emission fuels derived from hydrogen as they have the highest potential for long-term, cost-effective scale-up.

To achieve the 2050 ambition, the UN High-level Climate Champions have set a target of reaching five percent scalable zero emission fuels by 2030 as the breakthrough target for shipping decarbonization. A newly launched report tracking the progress towards this target finds that many commitments have been made over the last 24 months.

The report indicates that European maritime actors are leading the way towards shipping’s full decarbonization, which has many co-benefits for Europe like job creation, innovation, global competitiveness, cleaner air, and energy security. For example, at least 114 Europe-focused pilot projects for shipping are currently taking place, more than 60 European banks have signed up for the zero-emission banking initiatives, including the Poseidon Principles and the Net-Zero Banking Alliance, and 10 European countries have committed to developing green maritime corridors in the coming years under the Clydebank Declaration.

However, the report also shows that further progress to unlock investments, deployment, and scale-up can only come from getting the right incentivizing policies in place. Here the Fit for 55 package – especially FuelEU Maritime and ETS for shipping – can help address the fundamental price gap between fossil fuels and scalable zero emissions fuels, which includes renewable fuels of non-biological origin (RFNBOs). Closing this price gap will incentivize production, distribution, and use of scalable zero emission fuels at scale.

FuelEU Maritime can create incentives for the uptake of scalable zero emissions fuels, by inter alia including a sub-target and a multiplier for these renewable fuels as proposed by the EU Parliament’s Committee on Transport and Tourism.

Increasing the carbon intensity reduction targets in FuelEU Maritime as proposed by the TRAN Committee will stimulate demand for renewable fuels more generally, but an increase in targets must be complemented by corresponding supportive mechanisms to allow the maritime value chain to make the transition.

EU ETS can play a critical role as well. The zero-rating principle for renewable fuels use should be extended to shipping. And it is absolutely critical that revenue raised from shipping is reinvested to catalyze shipping decarbonization – as also called for by many maritime associations – in the same way that ETS revenue is already earmarked for decarbonization of other ETS sectors.

When reinvesting ETS revenue, the EU Commission and Member States should explore the use of Contracts for Difference, an effective subsidy scheme that has already been proven in the offshore wind sector. A recent study for the Getting to Zero Coalition showed that we can reach five percent scalable zero emission fuels by 2030 in Europe by using around 15-20 percent of the shipping based ETS revenue.

Policy action is one of the main drivers of decarbonization. If FuelEU Maritime and ETS for shipping are designed with the right incentivizing elements, Fit for 55 will catalyze the decarbonization of European and international shipping and support European companies in their efforts to be leaders in maritime zero emission technology and fuel production.

Adopting ambitious EU policy will also send an important signal to the International Maritime Organization (IMO) and its members that it should set an ambition of zero emission shipping by 2050 in line with the Paris Agreement’s 1.5°C degree temperature goal when revising the IMO’s GHG Strategy next year.

The signatories to this op-ed are all active in the Getting to Zero Coalition. The views expressed are those of the authors alone. 

About the Getting to Zero Coalition
The Getting to Zero Coalition is an industry-led platform for collaboration that brings together leading stakeholders from across the maritime and fuel value chains with the financial sector  to make commercially viable scalable zero emission vessels a reality by 2030, and achieve shipping’s full decarbonization by 2050. The Getting to Zero Coalition is a partnership between the Global Maritime Forum and the World Economic Forum.

The views expressed in this Insight are those of the author alone and not necessarily those of the Global Maritime Forum. Excerpts may be published with reference to the Global Maritime Forum.

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