Targeted incentives needed to scale low-carbon shipping fuels: MMMCZCS
The global maritime industry requires financial incentives to fast-track the adoption of low-carbon fuels, according to the Maersk Mc-Kinney Møller Center for Zero Carbon Shipping (MMMCZCS).
IMAGE: Methanol bunkering of one of Maersk's methanol-capable vessels in Singapore. Maritime Port & Authority of Singapore
Green marine fuels are “substantially more expensive” than the fossil alternatives they are expected to replace, making them less lucrative in the market, MMMCZCS said in a recent report.
This gap can be easily bridged with targeted financial support and subsidies, though the design of these schemes will determine whether shipping will secure short-term emissions cuts from fossil-based fuels or lay the groundwork for a future green fuel infrastructure.
Trying to do both with a single, undifferentiated subsidy risks achieving neither, MMMCZCS argues.
The report maps out how to structure rewards for zero and near-zero emissions fuels under the International Maritime Organization’s (IMO) Net-Zero Framework.
Those aiming to minimize emissions reduction expenses should lean toward implementing uniform incentive structures, MMMCZCS highlighted.
Meanwhile, those aiming to expand alternative fuels should prioritise varied incentive tiers, offering financial backing to more expensive yet highly scalable options like e-methanol and e-ammonia, the report added.
When analysing how to disburse monetary aid, the report evaluated fixed reward rates, flexible rates, and competitive bidding models.
While fixed reward rates offer greater stability, they often demand caps on qualifying quantities. Conversely, flexible rates safeguard the total budget pool but introduce unpredictability regarding final disbursements.
“All three instruments can respect a hard fiscal limit, but they allocate risk and uncertainty differently. Choosing among these options depends on the policymaker’s objective,” MMMCZCS said.
By Aparupa Mazumder
Please get in touch with comments or additional info to news@engine.online
