Regional regulations can bring biofuels and fossil fuels to 'cost parity' - Wärtsilä

The estimated price gap between synthetic and fossil marine fuels can be narrowed as early as 2035 because of regional regulations like EU ETS and FuelEU Maritime, a Wärtsilä report claims.

PHOTO: Stack of biofuel drums. Getty Images

Biofuels will see significant supply growth by the 2030s, while synthetic or e-fuels will only be available in significant volumes by the late 2030s, the report said.

However, higher production costs and competition from other sectors like aviation and transport could keep these fuels at a significant premium over fossil marine fuels. The report indicates that synthetic fuels are likely to be 3-5 times more expensive than fossil marine fuels in 2030, narrowing down to 2-3 times the cost of fossil marine fuels by 2050 and potentially reaching cost parity with biofuels by then.

The combination of EU ETS and FuelEU Maritime regulations could potentially double the costs of fossil marine fuels by 2030, which would significantly reduce the price gap between synthetic fuels and fossil marine fuels. There is even a possibility that biofuels could become cost-competitive with fossil marine fuels as soon as 2035.

“Every penny spent on preparing for sustainable fuels, every regulatory incentive, every new signal of increasing demand will stimulate supply and drive down costs,” the report highlights.

Regional regulations aligned with the IMO's interim targets, combined with a global carbon levy, will send clear signals to industry stakeholders. In addition, it will facilitate investments in bunker infrastructure and zero-emission technologies to lower costs of alternative bunker fuels.

According to the report, industry-wide measures such as "pooling purchasing power", where companies buy alternative fuels in bulk rather than through individual agreements, can also contribute to cost reduction. Such a measure will help reduce prices, lower supply chain costs and stimulate demand.

By Konica Bhatt

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