Connect with us

Alternative Fuels

UMAS report highlights need to refine EU ETS to catalyse uptake of zero-emissions fuels

New report entitled “Harnessing the EU ETS to reduce international shipping emissions” assesses some economic impacts most pertinent for understanding EU ETS potential.

Admin

Published

on

centered UMAS

London-based maritime consultancy UMAS on Thursday (2 December) published a new report for Environment Defense Fund (EDF Europe) stressing the need to refine the design of the EU Emission Trading System’s (ETS) inclusion of shipping to effectively reduce greenhouse gas (GHG) emissions from maritime shipping and advance zero-carbon alternative fuels. 

Reforms to its design such as an expanded scope, a sectoral emissions cap, and reinvesting revenues in shipping decarbonisation would all help build a stronger system able to generate meaningful emissions reductions in the decade.

The new report, titled Harnessing the EU ETS to reduce international shipping emissions, assesses some of the economic impacts most pertinent for understanding the potential for the EU ETS to reduce international shipping emissions and stimulate investment in zero-emissions fuels.

The EU ETS is the Union’s flagship cap-and-trade mechanism that has been in operation since 2005 to promote the reduction of greenhouse gases across the EU.

The EU’s proposal to include shipping in the EU ETS is a positive step to ensure that a portion of the global shipping industry is subject to a carbon price this decade — a key time period for the decarbonisation of shipping. 

However, the report finds that in its current proposed format, the EU ETS’ extension to global shipping may not contribute to significant emissions reductions or incentivise investment in Scalable Zero Emissions Fuels (SZEF). SZEF are a subset of fuels with the potential to produce zero emissions throughout their lifecycle and that have scalable production processes, capable of competitively supplying shipping’s expected future demand.

In addition to fuel and infrastructure policies, a higher carbon price is needed to incentivise crucial efficiency improvements while making nascent zero-carbon fuels more attractive. 

The study found that the EU ETS carbon prices, even at the record levels of €67.75/tonne CO2 observed recently, would not make a significant impact to close the gap between fossil shipping fuels and zero-carbon fuels. Recent analysis by UMAS for the Getting to Zero Coalition shows that an average carbon price of just under USD 200/tonne COis required to fully decarbonise the shipping sector by 2050.

The report also stresses the potential benefits of widening the scope of the scheme’s emissions coverage. The EU’s current proposal aims to cover maritime emissions from voyages within the European Economic Area (EEA) and half of the emissions from voyages into and out of the EEA from the rest of the world. Because vessels that trade internationally such as bulk carriers, containers, and tankers spend little time sailing within the EEA, the international or extra-EEA coverage is important to the success of the scheme. Further extending ETS scope from 50% to 100% of extra-EEA voyages could increase the emissions covered under the system by 70%.

Even under the full scope, the EU ETS may not provide a sufficient price incentive to drive investments in energy efficiency measures or SZEF. This is because most EEA related emissions come from ships which spend a relatively short period of time on EEA-related voyages during the year. 

Considering this annual trading pattern of ships, the average ‘effective carbon price’ (in the 50% and 100% extra-EEA voyages) is well below the historical variability in bunker fuel prices, when averaged across all ship types. 

For example, under a USD 103/tonne-CO2 price scenario in 2030, the average effective global price reduces to USD 22/tonne-CO2 or about 20% of the ETS price level because the majority of EEA-related emissions come from ships which spend a relatively short period of time on EEA-related voyages during the year. In its current form, the low carbon price may lead to insufficient or unintentionally harmful outcomes. 

The price could incentivise purchase of allowances in the ETS market and potentially lead to some speed reduction on voyages with the EEA, which can help generate revenue and fuel savings but are not enough to drive significant emissions reductions. 

Additionally, the low-price level and the exemption of methane emissions from the EU ETS could incentivise the uptake of LNG-fuelled ships, which can lead to environmental and policy cost-effectiveness risks.

A reform for consideration is the use of sector-specific caps on emissions. As a cap-and-trade system, the EU ETS has an overall emissions cap that applies to all sectors in the system combined rather than on individual sectors. It is this ‘hard cap’ that ensures that across the ETS sectors, emissions decline at a linear rate consistent with the EU’s climate targets. Implementing a sectoral cap on shipping emissions could support in-sector decarbonisation more directly.

Dr Sophie Parker, Principal Consultant at UMAS, lead author of the report said: “The shipping sector’s high abatement costs point to the need for an ETS which is tailored to support in-sector abatement. In the absence of a global carbon price, this could come from either a shipping ETS that places restrictions on the purchasing of out-of-sector allowances or coupling the EU ETS proposal with supply-side policies like subsidies which incentivise the uptake of scalable zero carbon fuels.”

A final important design opportunity is around the use of ETS revenues. Revenue is raised when ship owners purchase allowances from other sectors that find emissions reductions economically feasible at lower carbon prices, such as power generation. Currently, the EU directs revenue raised from the ETS to an Innovation Fund for low carbon innovation projects. 

The design creates an opportunity to ring-fence an adequate amount of funds generated from shipping’s inclusion in the EU ETS for stimulating R&D and early adoption of SZEF, leading to a more cost-effective transition. Other opportunities to allocate the funds should also include addressing disproportionately negative impacts on States and supporting a fair, inclusive and equitable transition.

“The EU Emissions Trading System’s inclusion of shipping is a can’t-miss opportunity to clean up the climate impacts of shipping. If we optimise this system to cost-effectively incentivise zero carbon fuels and reduce greenhouse gas emissions, it could create a domino effect toward decarbonisation,” said Panos Spiliotis, Manager of International Climate at Environmental Defense Fund Europe.

“The EU modeled climate leadership when it decided to include shipping in its ETS. Now, it has the opportunity to model climate ambition by designing this system to optimize impact.”

The proposal to include shipping emissions in the EU ETS is a step in the right direction toward the decarbonisation of the hard-to-abate sector. By considering the recommendations, the EU has an opportunity to strengthen shipping ETS when work begins on its Fit for 55 proposals.

Read the full report: Harnessing the EU ETS to reduce international shipping emissions

 

Photo credit: UMAS
Published: 9 December, 2021

Continue Reading

Technology

Singapore: MPA working with industry on next phase of digital bunkering, says Deputy CE

‘We are now working with industry on the next phase, trialling capabilities to further strengthen the integrity and quality of bunker data shared between stakeholders and MPA,’ says David Foo.

Admin

Published

on

By

Swapnil Bapat on Unsplash

Secure systems, trusted data and reliable digital services are becoming as important to maritime operations as physical infrastructure, said Mr David Foo, Deputy Chief Executive (Operations & Technology), Maritime and Port Authority of Singapore (MPA), on Thursday (10 September). 

In his opening keynote speech at APPEC 2026 Shipping And Bunker Conference, Foo said OCEANS-X, Digital Bunkering and the Maritime Digital Twin are enabling trusted data sharing, better operational planning and the testing of new digital solutions.

Foo said since 2025, digital bunkering has strengthened the efficiency and transparency of bunker operations. 

“We are now working with industry on the next phase, trialling capabilities to further strengthen the integrity and quality of bunker data shared between stakeholders and MPA.” he said.

He also said MPA is taking a forward-looking approach to the energy transition.

“Over the coming decades, we are likely to see the most diverse marine fuel mix in shipping’s history. There may not be a single fuel of the future.”

“Our role as a global bunkering hub is therefore not to determine which fuel will prevail. Our role is to ensure that whichever fuels the industry adopts, Singapore is ready – with the infrastructure, standards and operational capabilities to support them.”

Foo said MPA is making concrete progress across the major alternative fuel pathways with the issuance of methanol bunkering licences and the commencement of methanol bunkering operations. 

“For ammonia, we are developing the regulatory and operational frameworks needed to support future commercial deployment. We are also facilitating greater use of sustainable biofuels,” he said.

At the same time, MPA continues to expand its LNG bunkering ecosystem, with additional licences issued this year. 

“This will broaden supply options as more LNG-fuelled vessels enter the global fleet. We have also just updated our LNG standards, while maintaining the high standards of safety and reliability that underpin Singapore’s reputation as a trusted bunkering hub,” Foo added.

Related: MPA Chief Executive: Port of Singapore begins digital bunkering initiative today
Related: Singapore: Golden Island, GET, and PetroChina to receive methanol bunkering licences
Related: Singapore: Equatorial Marine Fuel among eight selected for new LNG bunkering licences
Related: Singapore strengthens LNG bunkering framework with new SS 727 standard

 

Photo credit: Swapnil Bapat on Unsplash
Published: 10 September, 2026

Continue Reading

LNG Bunkering

DNV report: LNG bunker fleet may need to more than double by 2030 to meet demand

Global LNG bunker vessel fleet may need to more than double by 2030 as demand from LNG-fuelled ships grows faster than the infrastructure required to supply them, according to DNV white paper.

Admin

Published

on

By

DNV report: LNG bunker fleet may need to more than double by 2030 to meet demand

The global LNG bunker vessel fleet may need to more than double by 2030 as demand from LNG-fuelled ships grows faster than the infrastructure required to supply them, according to a new DNV white paper published on Wednesday (9 September). 

The report estimated that between 165 and 208 bunker vessels could be needed globally by the end of this decade.

As LNG-powered shipping continues to grow, demand for bunkering capacity is rising rapidly. Although the LNG bunker fleet is expanding steadily, demand from LNG-fuelled vessels is expected to grow even faster, placing increasing pressure on bunker vessels and the wider bunkering ecosystem. 

Without additional investment across this value chain, fuel supply could become a constraint on further LNG adoption in shipping. DNV’s white paper, Gas bunker vessels: facilitating the transition to alternative fuels, highlights how gas bunker vessels are evolving from specialist fuel delivery assets into critical infrastructure supporting shipping’s fuel transition.

Cristina Saenz de Santa Maria, CEO Maritime at DNV, said: “Shipping’s fuel transition depends on more than ships and fuel choices. It also depends on the infrastructure, supply chains, and operational capabilities needed to make alternative fuels available safely and at scale. As the fuel landscape continues to evolve, investment in flexible, reliable, and future-ready bunkering infrastructure will be essential.”

The white paper examined market developments, regulatory requirements, vessel design considerations, gas bunker vessel technical specialities, and operational best practices, while outlining the role gas bunker vessels will play in supporting both current LNG demand and the future adoption of alternative fuels.

The white paper also highlighted opportunities to accelerate market development through the conversion of suitable small-scale LNG carriers into bunker vessels. 

In addition, it examined the growing importance of operational readiness, structured safety management, and competence development as bunkering operations become more frequent and geographically widespread.

Martin Cartwright, Global Business Director, Gas Carriers & FSRUs at DNV, said: “LNG-fuelled shipping is growing faster than the bunkering network needed to support it. Closing this gap will require coordinated investment across the bunkering ecosystem, underpinned by robust safety standards, operational readiness and competence. These elements must advance together if gas bunkering is to scale safely and reliably, while also supporting future pathways, such as biomethane.”

While the white paper focused primarily on LNG, it also considers the emergence of ammonia as a potential marine fuel. The infrastructure, operational experience, and safety frameworks being developed for LNG bunkering today are expected to play an important role in supporting the future deployment of ammonia bunkering solutions.

Note: The report by DNV can be found here

 

Photo credit: DNV
Published: 10 September, 2026

Continue Reading

EU ETS

KPI OceanConnect on EUAs: September is the deadline, but strategy is the bigger story

With 100% EU ETS exposure for 2026 emissions, an alternative fuels strategy can no longer be treated separately from carbon management, says Jesper Sørensen.

Admin

Published

on

By

Jesper Sørensen, Global Head of Alternative Fuels and Carbon Markets at KPI OceanConnect

Jesper Sørensen, Global Head of Alternative Fuels and Carbon Markets of KPI OceanConnect, on Wednesday (8 September) wrote that while the 30 September deadline to surrender EUAs is approaching, managing exposure to EU ETS is about more than how and when allowances are purchased.

He said fuel choice and alternative fuels strategy should also form part of companies’ broader carbon-management approach: 

EUAs: EU ETS surrender deadline highlights rising maritime carbon costs, as higher compliance obligations and EUA exposure increase the strategic importance of biofuels, fuel procurement and integrated carbon management ahead of full shipping inclusion in the EU ETS from 2026.

As the 30 September EU ETS surrender deadline approaches, the immediate message for shipowners, operators and charterers is straightforward: make sure your verified emissions position is understood, your exposure is calculated, and your allowance needs are settled in good time.

But this year’s deadline should also be seen as something more than an annual compliance event. It is a reminder that carbon costs are becoming an increasingly important part of vessel operating economics, and that the most effective response is not only to buy EUAs but also to think more strategically about how fuel choices influence overall compliance exposure.

This matters because the cost of the same level of emissions is rising even before we consider market volatility in EUA prices. The reason is the phase-in of the maritime EU ETS. For 2024 emissions, shipping companies were required to surrender allowances for 40% of in-scope CO₂ emissions. For 2025 emissions, that rises to 70%. From 2026 emissions onwards, the obligation moves to 100%.

In other words, even if the EUA price were to remain unchanged, the compliance bill for the same emissions profile becomes materially larger. That is an important shift. It means carbon exposure is no longer something to address only at the end of the reporting cycle. It increasingly needs to be considered when making fuel procurement and voyage-planning decisions.

The EUA market itself reinforces that point. Price volatility remains a feature of the market, and that makes planned procurement more important than ever. The objective is not to predict the perfect entry point. It is to understand the exposure, settle the near-term obligation in a timely manner, and develop a strategy to reduce future risk. But managing EUA exposure is increasingly about more than how and when allowances are purchased.

Over recent months, the economics of biofuels, particularly B100, have become increasingly compelling in several trading scenarios. When assessed only on a headline fuel price basis, the picture can appear mixed. But when viewed through the lens of total compliance cost, the economics can look materially different.

Qualifying sustainable biofuels can help reduce EU ETS exposure by reducing the number of allowances that need to be surrendered, while also improving compliance under FuelEU Maritime. In other words, a well-structured biofuel strategy can support compliance across both regulatory regimes simultaneously.

It does not follow that biofuel is automatically the most efficient solution for every vessel, voyage or trading pattern. In many cases, purchasing EUAs will remain the right answer. In others, alternative fuels can reduce exposure across multiple regulatory frameworks and materially change the overall economics.

That is why the September surrender deadline should be viewed as both a compliance event and a useful point to look forward.

With 100% EU ETS exposure for 2026 emissions, an alternative fuels strategy can no longer be treated separately from carbon management. Fuel procurement, EUA procurement, and FuelEU compliance increasingly need to be considered together before the bunker decision is made, rather than after emissions have already occurred.

 

Photo credit: KPI OceanConnect
Published: 10 September, 2026

Continue Reading

Trending