EMEA News
Biofuel Value Is in Carbon Score, Not Feedstock Label: ScanOcean
As the shipping industry races to reduce its carbon footprint, the way marine biofuels are valued and benchmarked is undergoing a fundamental shift.
Swedish bunker supplier ScanOcean says the future of marine biofuel markets will hinge on greenhouse gas (GHG) performance rather than the type of feedstock used.
Various types of feedstock are used in biofuel production, including used cooking oil (UCO) and animal fat.
Historically, biofuels have often been assessed based on their type of feedstock used. For instance, Ship & Bunker has seen biofuel blends from HVO often priced higher compared to FAME-based blends.
However, emerging regulations are upending this traditional view.
Compliance Efficiency Depends on GHG Performance
"Fuel EU Maritime, for example, regulates on a Well-to-Wake (WtW) basis. A marine biofuel bunkered in Europe produced from used cooking oil (UCO) in Europe will often score better on a WtW basis than an identical biofuel with similar feedstock produced in China, Jonatan Karlström, Managing Director of ScanOcean, told Ship & Bunker.
"While the EU ETS treats both the same, Fuel EU Maritime does not."
Choosing a high-GHG-performance biofuel over the cheapest biofuel may offer greater value in the long run.
"Because mandates are met by GHG intensity reduction rather than renewable fuel volume, a higher-performance biofuel requires less bunkered fuel to comply, even if its per-tonne price is higher.
"Many ship-owners initially compare only the sticker price of different biofuels and conclude the cheaper option is best," Karlström explains.
ScanOcean explains that some ultra-low-carbon biofuels, like those made in Sweden, deliver such deep emissions cuts that total compliance costs can actually be lower.
The next logical question is, could the market develop multiple benchmarks depending on feedstock type or emissions profile? According to ScanOcean, only a GHG-based benchmark makes sense today.
"Any feedstock-specific 'index' would simply be a proxy for its lifecycle emissions—and regulators will want to reflect actual WtW performance, not a feedstock label," Karlström said.
However, Karlström still sees that feedstock categories do matter because some qualify under certain regulations but not others.
"That said, feedstock "baskets" do matter in practice—certain feedstocks qualify under the EU ETS but not under Fuel EU Maritime, and the IMO's forthcoming Net-Zero Framework, although expected to be a little more loose in terms of feedstock requirements, is likely to layer on further variations," Karlström notes.
More Expensive Doesn't Always Mean More Costly
Shipping is a cost-focused industry where operating expenses are closely tied to fuel costs. So, a key question is whether shipowners will be willing to pay more upfront for low-carbon biofuels that could save money in the long run.
"No ship-owner enjoys a higher fuel bill, Karlström said.
"But under Fuel EU Maritime, you must perform a rigorous cost-per-tonne-of-CO2-avoided analysis to identify which fuel delivers the greatest CO2 reduction per Euro spent—meaning that, even if it has the highest sticker price, it may prove the most economical choice overall."
According to ScanOcean, the mindset is already shifting. Buyers are increasingly prioritising fuels that offer real emissions compliance over simply opting for the lowest price per tonne.
The firm expects biofuel bunker demand to pick up in the latter half of the year, as many shipowners who've been holding off on compliance purchases under FuelEU Maritime begin to act.
2028 IMO Rules Could Boost Biofuel Use
Looking further ahead, Karlström anticipates a significant surge in demand starting in 2028, when the IMO's Net Zero Framework is expected to take effect.
He also warns that biofuel demand could outpace supply. "Although the market often surprises with faster-than-expected ramp-ups, global green-fuel capacity is being stretched across all sectors," he said.
Despite the potential for some narrowing, marine biofuels are expected to remain at a premium over conventional marine fuels for the foreseeable future.
"The IMO's new framework will introduce new feedstock eligibility criteria and will have an additional and probably very different model of pooling-and-over-compliance transfer mechanism, adding layers of complexity to bunker planning.
"At ScanOcean, we've built advanced modelling tools that identify the lowest-cost compliance pathways under both today's and tomorrow's regulations—so our customers can navigate the complexity and secure the best overall outcome," Karlström concludes.
