EU regulations to close price gap between sustainable, fossil methanol: MI

EU regulations will be sufficient in eliminating the price premiums of sustainable methanol to conventional, oil-based bunker fuels, the Methanol Institute said Sept. 24, highlighting the role regulators play in promoting maritime decarbonization.

In a white paper, the MI, a trade group established to promote the methanol industry, said the EU will create "a level playing field" for biomethanol and eMethanol, making the fuels "economically competitive" compared with conventional fuels in EU-related trades.

Methanol, when produced from biomass or renewable hydrogen via sustainable means, is a low-carbon fuel that can help shipping companies achieve deep decarbonization, but such "green" methanol is scarce and their prices are high.

The August monthly average price of delivered 0.5%-sulfur marine fuel oil, the prevalent bunker type, was $543 per metric ton according to Platts data from S&P Global Commodity Insights.

Gray methanol produced from fossil fuels, which dominates global methanol supplies currently, was assessed at $742/t when its energy content is adjusted to be equivalent to 0.5%S fuel. Industry estimates suggest green methanol could be two-to-five times more expensive.

However, Brussels has extended the Emissions Trading System to cover 40% of the greenhouse gases from ships sailing to, from and between EU ports from 2024, a proportion that will increase to 100% from 2026, when the MI said the additional cost for burning 0.5%S fuel could reach Eur321/t ($358/t).

Separately, the EU will lower the upper limit of greenhouse gas emissions intensity of marine energy used by ships involved in trading with the bloc from 2025, progressively until 2050, via the FuelEU Maritime rules.

This regulation suggests ship operators will face a non-compliance cost of Eur39/t when burning 0.5%S fuel oil without any mitigation efforts like biofuel blending in 2025, which will increase over the decades to Eur1,997/t in 2050, according to the white paper.

Cost estimates

In comparison, the MI expects the average maximum price for biomethanol to be Eur1,193/t in 2025-2050. It also forecasts eMethanol prices to be Eur2,238/t in 2025-2033 and Eur1,325/t in 2034-2050. The ETS compliance cost for burning the two fuels are expected to be Eur150/t.

With green methanol's availability expected to be low in the near term and prices higher than gray methanol, some industry participants said shipping firms could opt for blends of the two to kickstart decarbonization.

FuelEU Maritime tightens greenhouse gas requirements for marine energy every five years, and the MI estimates the blending needs would be 14% biomethanol and 7% eMethanol in 2025, 28% biomethanol and 25% eMethanol in 2035, and 100% biomethanol and 91% eMethanol in 2050.

"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," said Gregory Dolan, the MI's CEO.