High costs and unclear rules are impeding the transition to green marine fuels

The Baltic region is well placed to take a leading role in the transition to climate-smart marine fuels. But high costs, uncertain timetables and weak political signals risk significantly slowing the transition, relative to what climate targets require, according to a new report from IVL Swedish Environmental Research Institute.

Shipping is one of the sectors that is having the most difficulty transitioning to fossil-free operations. Our report shows that hydrogen-based electrofuels, such as electroammonia and electromethanol, will be key to meeting the climate targets in the long term, says report co-author Linda Styhre, researcher in sustainable maritime transport at IVL Swedish Environmental Research Institute.

A comprehensive new survey conducted as part of the Interreg project H2Derivatives@BSP shows that nearly 300 hydrogen-related projects are planned around the Baltic Sea, and that several countries are positioning themselves as future producers and exporters. While many of these projects will not be realized, Sweden is considered particularly well-positioned to develop electrofuels, thanks to its strong industrial clusters, fossil-free electricity production, and access to biogenic carbon dioxide.

Sweden has much to gain from building up domestic production of e-fuels. It bolsters energy security, creates new value chains and can give Sweden a future export role for marine fuels, while also providing shipping with access to the renewable fuels it needs, says Linda Styhre.

Ports in the Baltic Sea region are expected to play a key role as future energy hubs. Many ports are already planning for the storage and bunkering of new fuels, but more measures are needed immediately to ensure that Sweden does not risk falling behind in the transition.

The researchers point out in particular that ports need to strengthen their electricity grid connections and increase cooperation with both fuel producers and shipping companies in order to understand what type of fuel and solutions are in demand.

Actors are hesitant to invest

The report shows that both energy companies and ports see the new fuels as necessary in the long term. But electrofuel production is still expensive, and actors are hesitant to invest when they do not know how strong demand will be or which fuel type will dominate.

EU regulations such as FuelEU Maritime, EU ETS and AFIR play an important role in driving the transition, but are not considered sufficient to kick-start sufficient domestic European production in the coming years.

The regulations are crucial, but are currently insufficient. In order to build the first large production facilities, there must be financial support and risk sharing, clearer instruments and faster permitting processes. This will enable us to accelerate the transition and reach the climate goals on time, says Karl Jivén, report co-author and shipping expert at IVL.

Download the report: H2-Derivatives market demand analysis for Baltic Sea Ports External link, opens in new window.

For more information, contact:
Linda Styhre, linda.styhre@ivl.se, tel. +46(0)72-727 293 09
Karl Jivén, karl.jiven@ivl.se, tel. +46(0)10-788 67 27

The report was produced as part of the H2Derivatives@BSP project. In the Swedish part of the project, IVL Swedish Environmental Research Institute collaborates with Closer Lindholmen Science Park, LTU Business, the Port of Luleå and the Port of Piteå. The project is funded by Interreg Baltic Sea Region, with co-funding from the European Union and support from the Swedish Transport Administration. Read more about the project: Knowledge base for renewable fuels in shipping – IVL.se