Linking the employment of alternative marine fuels to a carbon price for shipping

Abstract

Over the past few decades, the maritime sector has faced a notable hurdle in fulfilling the imperative to decrease greenhouse gas (GHG) emissions resulting from its operations. The "2023 IMO Strategy for the Reduction of GHG Emissions from Ships" underscores the urgent necessity to proactively address this issue to reach net-zero GHG emissions by or around/close to 2050. To achieve these targets, it is crucial to replace fossil fuels with alternative fuels and energy sources. Hydrogen and ammonia are regarded as some of the alternative fuels having the greatest long-term potential for achieving decarbonization in maritime transport. Nevertheless, their employment presents challenges due to the substantial capital investments needed for new engines, fuel systems, port infrastructure, and the elevated operational costs stemming from their higher prices compared to conventional fuels. This research delves into the expenses and advantages associated with the adoption of hydrogen and ammonia as marine fuels, considering various production methods. Initiating the evaluation of the cost dynamics of these fuels, our analysis aligns with established research, confirming that green hydrogen emerges as notably the most expensive marine fuel option, followed by green ammonia, blue hydrogen, and blue ammonia. It is crucial to acknowledge, however, that the emissions costs linked with green hydrogen, closely followed by green ammonia, are minimal when compared to conventional fuels, including their blue counterparts. The considerable overall costs associated with the adoption of green fuels underline the imperative need for implementing Market-Based Measures (MBMs).