Methanol Bunker Demand to Receive Boost From EU Regulations

EU regulations are helping to narrow the gap between conventional and alternative bunker fuels. File Image / Pixabay

Demand for methanol as a bunker fuel is set to receive a boost from the EU's regulations on shipping's emissions, according to industry body the Methanol Institute.

The combination of the EU's emissions trading system and its FuelEU Maritime regulation will help to deliver a level playing-field for bio- and e-methanol, according to a new white paper prepared for the Methanol Institute.

The additional costs from these regulations for users of conventional bunker fuel will narrow the premium over these fuels paid for green methanol, the industry body said in an emailed statement.

The study makes the following findings on how this gap will be narrowed:

• Regulatory penalties and costs: The FuelEU Maritime Regulation sets targets for reducing greenhouse gas emissions from the maritime sector and imposes increasingly severe penalties on fossil fuels such as Very Low Sulfur Fuel Oil (VLSFO). Non-compliance costs for vessel owners will escalate from €39 per ton in 2025 to €1,997 per ton by 2050.
• EU ETS implementation: Regulatory costs under the EU ETS carbon emission trading scheme that also covers the maritime sector, are phased in from 40% in 2024 to 100% in 2026. With a projected market price of €100 for CO2 emission allowances, the additional cost for VLSFO is estimated at €321 per ton.
• Compliance options: To avoid these penalties, vessel owners can use bio- or e-methanol, or blends of fossil and sustainable methanol as viable compliance options and encourage the development of a sustainable methanol supply chain.
• Price estimates: The analysis forecasts the average maximum price for bio-methanol to be €1,193 per ton from 2025-2050. For e-methanol, prices are estimated at €2,238 per ton from 2025-2033, decreasing to €1,325 per ton from 2034-2050 when the reward factor for using renewable fuels of non-biological origin (RFNBO) expires in 2034. Including EU ETS costs, these prices rise by €150 per ton for both fuels.
• Fuel blends: Every five years, the FuelEU Maritime greenhouse gas emission targets increase, from 2% in 2025 to 80% by 2050.  These targets can be met by blending bio- or e-methanol with conventional natural-gas based methanol, increasing from 14% bio-methanol and 7% e-methanol in 2025 to 28% bio-methanol and 25% e-methanol in 2035, and fully 100% bio-methanol and 91% e-methanol by 2050.
• Economic viability: Both bio- and e-methanol show significant economic potential under the new regulations. The FuelEU Maritime Regulation and EU ETS are expected to effectively promote the adoption of these sustainable fuels in maritime shipping.

"The study confirms the profound impact of regulations on the demand for methanol as a marine fuel," Gregory Dolan, CEO of the Methanol Institute, said in the statement.

"The findings indicate that the emerging EU regulatory framework is robust enough to enhance the business case for low-carbon and renewable methanol fuels and fuel blends, supporting the transition to a sustainable maritime industry.''