INSIGHT: Not All Biofuel Bunkers Are Equal - Navigating Carbon Intensity, Compliance, and Cost

Bastien Declercq is CEO of Marex division CSC and head of environmental at Marex. Image Credit: Bastien Declercq

Biofuels have a wide spectrum of carbon intensities, largely depending on the feedstocks used.

For example, crop-based biofuels and biogases tend to have a higher carbon intensity compared to those derived from agri-food waste. Overall, their carbon intensities can vary from over 25 grams of CO₂ equivalent per megajoule (gCO₂eq/MJ) to below -100 gCO₂eq/MJ.

Biogas derived from agricultural and food waste - such as manure and food scraps - not only results in lower emissions, but can also deliver negative carbon intensities by capturing methane emissions that would otherwise escape into the atmosphere.

Last month's International Maritime Organization draft deal on shipping emissions established a maximum carbon intensity of 19.0 gCO₂eq/MJ for zero and near-zero fuels (ZNZs) until December 2034, with this threshold set to be lowered to 14.0 gCO₂eq/MJ from January 2035.

Considering the carbon intensities from biofuels and biogases range from +25 to -100, a large number could be eligible as ZNZ energy sources under the current deal. However, further details regarding particular feedstocks, their emission intensity figures, and associated financial rewards for overachieving emission reduction goals are still evolving and under discussion.

In comparison, the European Union's Renewable Energy Directive (RED) does specify the feedstocks approved for biofuels and biogases in the EU. While the IMO is not bound to adopt the same feedstock criteria, RED's Annex IXa offers a useful indication of the types of feedstocks that might shape the future market.

Price Outlook

Forecasting price trajectories between 2028 and 2035 is particularly challenging due to the sheer variation across biofuels and biogases.

Prices are influenced not only by carbon intensity, but also by the country or region of origin, its transport and liquefaction infrastructure and delivery method.

Given these parameters, two bio-LNG cargos may have radically different cost structures, even if both qualify under current and emerging regulations.

With the potential of a variety of biofuels being eligible to be considered as ZNZs, demand will shift towards those fuel types that offer an optimal balance of cost and emissions reduction. If, as expected, regulations continue to tighten and waste-based biomethane and biofuels with low or negative intensities are favoured, prices for these are likely to rise in the future.

European biofuel and biogas markets have experienced a recent period of stagnation and depressed prices. The IMO's agreement on shipping emissions—together with EU and national measures like the Netherlands' upcoming biomethane blending obligation (starting in 2027), could help reverse that trend. 

France and Germany are also exploring or implementing similar policies. The confluence of international regulations and domestic blending obligations could drive demand for IMO-compliant biofuels and biogases, especially waste-based biofuels and biogases with very low or negative carbon intensities. 

That, in turn, may lead to an increase in prices. 

However, it remains difficult to predict price developments in the short to medium term.

While the biofuels market remains uncertain, with the IMO looking to decrease carbon intensity of all ships by 40% by 2030 compared to 2008 and with the IMO's new rules entering into force in 2027, shippers and shipping companies need to have clear sourcing and price hedging strategies to ensure they acquire the necessary products at the lowest possible price.

We see particular potential in using biomethane as feedstock to produce a variety of low-carbon, synthetic marine fuels that can be tailored to the end user's specifications. 

As compliance costs rise and specifications tighten, having the right tools to access low-carbon fuels at the best possible price will be essential.