Sustainable shipping fuels can reach cost parity with fossil fuels by 2035, says Wärtsilä report

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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, according to a new report launched this week by technology group Wärtsilä.

The report, titled ‘Sustainable fuels for shipping by 2050 – the 3 key elements of success’, reveals that the EU Emissions Trading Scheme (ETS) and FuelEU Maritime Initiative (FEUM)[i] will see the cost of using fossil fuels more than double by 2030.[ii] By 2035, they will close the price gap between fossil fuels and sustainable fuels for the very first time.[iii]

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 IMO set a target of achieving net zero emissions by 2050. Existing decarbonisation solutions, such as fuel efficiency measures, could cut up to 27% of emissions. Wärtsilä’s report argues that sustainable fuels will be a critical step in eliminating the remaining 73% but radical action is needed to scale them. The industry suffers from a “chicken and egg” challenge – ship owners 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 modelling 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 & Executive Vice President at Wärtsilä Corporation says: “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.”

Investing in fuel flexibility is 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 decarbonisation by mid-century – within the lifetime of just a single vessel. It can be downloaded from the Wärtsilä website.

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