Carbon-neutral shipping and aviation using green hydrogen or its derivatives will not happen without major intervention by governments around the world, according to a report by the International Transport Forum.

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The agency, part of the 38-nation Organisation for Economic Co-operation and Development (OECD), said e-fuels such as green hydrogen, green ammonia and e-methanol cannot overcome low cost competitiveness with conventional fuels without policy intervention.

“To replace significant amounts of fossil fuel use in shipping and aviation, production volumes will need to increase rapidly and this will happen only with targeted government support,” says the report, The Potential of E-fuels to Decarbonise Ships and Aircraft.

“Maritime transport and aviation face similar barriers to shifting away from fossil fuels. The fuel used in international journeys in both sectors is exempt from taxation. Their exposure to international competition prevents governments from implementing unilateral rules that increase costs to operators.

“The lack of fuel taxation means that fuel prices do not appropriately reflect the environmental damage caused by aircraft and ships burning fossil fuels. The lack of taxation is also one reason why novel, low-carbon fuels are not cost-competitive and unable enter the market without additional policy intervention.”

The study looked at using green hydrogen, ammonia and methanol for shipping, and H2 and synthetic kerosene derived from renewable hydrogen for aviation, and compared them to the other green alternative — biofuels.

Green methanol and e-kerosene would both require the addition of captured CO2 from the air to be considered carbon-neutral, but could be used with minimal vessel or airplane modifications.

“To be considered low-carbon, carbon-based e-fuels [ie, derived from electricity] must be produced with renewable hydrogen and carbon feedstocks sourced from the atmosphere,” the report explains. “Carbon feedstocks will remain expensive until cheap low-carbon energy becomes widely available. Alternative carbon feedstocks can be sourced from industrial point sources but only offer a limited decarbonisation benefit.

“These factors mean that other forms of low-carbon liquid fuels, such as sustainable biofuels, will likely be a more cost-competitive, low-carbon solution during the transition.

“However, even sustainable biofuels have low market shares in the shipping and aviation industries. Sustainable aviation fuels, for instance, only account for 0.1% of kerosene use today. Sustainable biofuels also face competing demand from many other sectors.”

The report adds that green hydrogen and ammonia would be cheaper to produce but have more technology hurdles when it comes to deploying them on ships.

“To become a viable option, non-carbon-based fuels require complex transport and refuelling infrastructure and will need technological advances with regard to fuel storage and propulsion systems,” it explains.

“Since non-carbon-based fuels are not drop-in fuels that are compatible with existing technology and infrastructure, their adoption will likely be slow, as it depends on fuel availability and vehicle fleet turnover.

“Hydrogen requires dedicated transport and highly specialised fuel tanks on-board. Ammonia avoids some of these disadvantages and could thus be more suitable as a shipping fuel.”

But it adds: “CO2 emissions benefits of ammonia could be entirely offset by reactive nitrogen emissions from its combustion. Avoiding this requires highly effective after-treatment technologies and the minimisation of fugitive emissions. A rigorous monitoring system would likely be necessary.

“Ammonia could also cause environmental disasters in the event of a spill, making strict safety guidelines necessary.”

Methanol seems to be the preferred option in the shipping world right now, with data from shipbroker Clarksons showing 45 vessels on order that will use the alternative fuel, even though most volumes of the chemical today are made from fossil fuels. The first ammonia-powered ships are due to hit the water by 2026.

To produce enough e-fuels to spur significant adoption in shipping would require huge increases in renewable electricity generation, as well as cost reductions in both electrolysers and carbon capture, the ITF report explains.

“A significant level of e-fuels use will take at least a decade to achieve,” write the authors, Andreas Kopf, Till Bunsen and Matteo Craglia. “Even that will depend on solid policy support to reduce the price gap with conventional fossil fuels.

“E-fuels will likely remain a scarce resource in the medium term, given the timescales involved in scaling up production capacity.”

The ITF researchers point to the need to put a price on carbon, which is currently under discussion at the International Maritime Organization and will be implemented in the EU in 2024, when shipping enters its emissions trading system.

But the authors also want governments to step in to bring down the cost of producing e-fuels.

“Governments should prioritise deploying these technologies for decarbonising existing hydrogen demand and phasing out fossil fuels in power generation where the financial barriers to entry are lower than in creating e-fuels,” they write.

“Doing so can kick-start technology development, attract investment and reduce costs. These gains can also benefit decarbonisation efforts in shipping, aviation and industry.”

They also called for strict standards to ensure e-fuels are truly low carbon — another topic under debate at the IMO as it considers well-to-wake emissions accounting.

That means there should be criteria to ensure that such fuels are produced from new sources of renewable energy, so they do not compete with existing demand, the researchers said.

A version of this article first appeared in Hydrogen Insight’s sister publication TradeWinds, which covers the global shipping industry.