Massive subsidies for green fuels, newbuilding and retrofit drive needed immediately, research says

UCL Energy Institute research finds IMO Global Fuel Standard, incorporating taxes on greenhouse gas emissions and credits for circular fuels, will not be decisive enough to incentivise the massive surge of retrofits and fleet renewal needed to meet green targets.

The measures are unlikely to trigger a transition to new fuels before 2040, research by UCL, as well as the Oceans Research Group and University Maritime Advisory Services (UMAS), said.

A 1.5°C-aligned shipping fleet would be impossible without a sudden and overwhelming shift to immediate operation on renewable fuels, brought on by a decisive swing in shipbuilding and a flurry of green retrofits between 2027 and 2035, the group has said in recent research, adding that this will not be achievable without “direct subsidies”.

“Lack of a clear business case for e-fuels will undermine investment and prevent cost reduction through learning effects and supply chain development,” said a document released last week. “This creates a risk that e-fuels will remain scarce and expensive, depriving the sector sight of its long-term transition pathway.”

“The IMO’s fuel standard is critical for the longer-term certainty of demand, and longer-run investment… but under this policy alone, this new analysis shows that the market will struggle to make an e-fuel business case before 2040, and therefore e-fuels such as green ammonia will not be available for shipping’s use in any volume,” said Tristan Smith, Professor of Energy and Transport at the UCL Energy Institute.