Take up of Zero-emission Fuels Could be Triggered by Financial Instruments

by Ship & Bunker News Team
Wednesday May 11, 2022

A financial instrument called a contract of difference could ease shipping's transition towards net zero, according to new research by industry grouping Getting to Zero.

The sector's take up of new fuel forms is held back by the cost difference between new and conventional fuels, and particularly zero-emission fuels.

According to a Getting to Zero proposal, contracts for difference could help shipping players bridge that price gap. 

Under the scheme, the supplier would be paid the difference between a predetermined reference price reflecting the old technology — for example the cost of conventional fuel — and a strike price set at the value required for the new technology to be viable.

This would hold for the duration of the contract unless the reference price rises above the strike price, in which case the supplier repays the subsidy. 

Contracts for difference could be paid for out of the European Union's emissions trading system income, according to the group.

Financing a 5% market share for zero-emission fuels by 2030 would cost EUR 1.2 billion a year ($1.3bn), it said. 

The Getting to Zero initiative is part of industry lobby group Global Maritime Forum.