Shipping Industry Comes Out of the Shadows at COP28
Beyond choosing the appropriate conventional fuel grade for the blend, the provenance of the biofuel component is a key consideration. Biofuels such as Biodiesel or HVO are produced from a range of biomass feedstocks, with varying degrees of environmental credentials.
The feedstock types are divided into generations: first-generation biofuels are produced from food crops on arable land, the second generation come from waste products from industries like fish processing, while the third are sourced from more advanced sources like algae.
Products produced from first-generation are increasingly frowned upon by various groups both for taking away arable land and for not delivering sufficient net reductions in GHG emissions, particularly when sourced from palm oil, and may increasingly face legal restrictions in the coming years. For that reason, first-generation biofuels are considered as ‘fossil’ under IMO regulations and will not play a role in decarbonizing the shipping sector.
Production of biofuels from second-generation is currently being expanded significantly, but output levels cannot rise indefinitely without sufficient waste feedstock, and a range of industries including aviation will soon be competing aggressively for access to these fuels. And production of the third generation has yet to take off in a significant way.
A certified supply chain
Guaranteeing the origins of the biofuels is another important consideration, to ensure that the emissions savings are genuine and have not been double-counted.
In drawing up their guidelines for biofuel bunkering, Singapore’s authorities as an example have recommended that buyers only take on biofuel blends that have been certified by the ISCC (International Sustainability and Carbon Certification).
The ISCC certification ensures that biofuels meet internationally recognized sustainability and traceability standards. Assessing the sustainability credentials of biofuel producers, verifying the compliance of their production processes, and ensuring transparency throughout the supply chain is key when purchasing biofuels.
IMO has also just adopted a guideline on biofuels defining the criteria for a sustainable biofuel and how it should be reported into the IMO Data Collection System.
Biofuel quality tests
Even though biofuels are an excellent low-carbon solution and drop-in fuel, there are parameters to look out for that may be less familiar to buyers used only to conventional fuels. The ISO 8217 tests used for conventional bunkers work as an initial check of relevant quality parameters of the blends, however fuel quality firm VPS also recommends carrying out tests looking out for the following parameters:
- Renewable content
- Oxidation stability
- Energy content
- Cold flow properties
- Corrosivity
- Microbiological activity
Price considerations
Considering costs, this can vary significantly around the world according to local regulations, availability and last mile delivery. In Europe biofuels demand will be driven by FuelEU Maritime regulation, mandating for GHG reduction in shipping as of 2025, which will have an effect on biofuels prices. Though today bunkering for example in the Netherlands can benefit from subsidies that can apply to biofuel bunker sales and reduce their net costs significantly. In the US the lack of similar measures has meant the marine biofuel market has yet to emerge in a significant way.
In Singapore, recent market analysis has put the cost of a B30-VLSFO blend at a premium of 20-30% over VLSFO prices.
Ultimately, most of the pitfalls around buying biofuel bunkers can be avoided in the selection of an experienced marine fuels firm to help with the purchase. An ISCC certified and well-established company will be able to guide shipping companies through every stage of decision-making, from quality assurance to emissions planning and reporting, delivering peace of mind to the buyer.
