Biofuels and LNG emerge as near-term winners amid policy uncertainty
U.S. President Donald Trump may have taken some wind out of the sails of the energy transition, but there appears to be enough momentum globally that the decarbonization of certain sectors, like international shipping, will continue, albeit at a slower pace.
And that’s good for B.C. natural gas, LNG and biofuels producers, since LNG, biodiesel and renewable diesel appear to be the clear winners in near-term solutions for decarbonizing international shipping.
At a forum on decarbonizing the marine sector last week hosted by the Vancouver Maritime Centre for Climate, attendees were updated on the greening of global shipping. That greening effort is experiencing some headwinds, thanks to Trump.
In 2020, the International Maritime Organization (IMO) introduced new global regulations requiring international shippers to reduce pollutants from the burning of marine bunker fuel — including nitrous and sulphur dioxide and particulates.
That measure alone kickstarted a shift to less polluting fuels, like methanol and liquefied natural gas (LNG).
In 2023, the IMO adopted a draft plan for reducing shipping’s greenhouse gases as well. The plan is to put a global carbon price on international shipping.
Just last month, however, the IMO delayed implementation of a new framework for a new global fuel standard for shipping, after Trump threatened sanctions against countries who voted in favour of its implementation.
“The United States will NOT stand for this Global Green New Scam Tax on Shipping,” he said on the Truth Social platform.
In response to the U.S. backtracking on these and other climate change commitments, DNV, an assurance and risk management company, recently published an outlook that projects a delay in decarbonization efforts.
Dan Woynillowicz, principal for Polaris Strategy and Insight and one of the two climate policy experts appointed to a CleanBC review, acknowledged climate change is being pushed down the public policy priority list.
“What we’ve seen is that climate change as an issue of public concern has fallen down the list,” he said. “It’s now fourth, fifth, sixth down the list.”
But there is already some momentum in the energy transition, including in shipping. Many shippers are already moving to lower carbon fuels and technologies.
“It’s been a year of disruptions both globally, on trade, on geopolitical issues, but the goal of decarbonization … is still moving forward,” said Jan Hagen Anderson, Americas business development director for DNV Maritime. “The fuel technology transition is well underway.”
For inner waters, electrification of ferries and short-haul cargo ships is starting to take place, notably in Norway. For international shipping — container ships, tankers, bulk cargo ships — electrification isn’t an option.
Anderson listed half a dozen potential low or zero carbon fuels and technologies for international shipping, including hydrogen, ammonia, methanol, LNG, nuclear power and even onboard carbon capture.
But LNG appears to be among the top choices for cleaner marine fuels, at least in the near-term, based on order books for hybrid, dual-fuel engines for shipping.
FortisBC is hoping to seize the opportunity that LNG presents for shipping by making Vancouver a major LNG bunkering port. Canadian biofuel producers are also hoping to get in on the marine bunkering game.
FortisBC’s planned Tilbury Island marine jetty is intended to serve LNG bunkering vessels. Seaspan already operates three LNG bunkering vessels that serve the Pacific coast, from Vancouver to California.
Tyler Bryant, director of decarbonization and sustainability for FortisBC, said FortisBC bunkered 300 terajoules of LNG in 2023 (terajoule is equal to about 0.278 GWh). That increased to 1.6 petajoules (about 444 GWh) in 2024, and this year it is on track to supply four petajoules of LNG for marine bunkering — about 80,000 metric tonnes.
Globally, there were roughly 500 LNG-powered vessels on order in 2024, with delivery expected in 2028, according to DNV.
“That bunkering load or demand will be satisfied,” Bryant said. “We want some of that, or a lot of that, to happen here.
“There’s no reason why bunkering vessels could not go down to Port of Los Angeles, with their origins as Vancouver here.”
As for biofuels, one advantage biodiesel and renewable diesel have over LNG is that they require little to no engine modifications. They are drop-in fuels with lower carbon intensity, and so are good near-term solutions for decarbonizing shipping.
Natural gas, on the other hand, requires natural gas engines, so it is more of a solution for new builds and retrofits. One advantage that LNG has over other fuels is its low cost.
“It trades at a discount to very low sulphur fuel,” Bryant said. “It’s about 20 per cent cheaper.”
When carbon credits are applied, biodiesel gets credits of $1.40 per litre, compared with $1.15 per litre for renewable diesel, said Graeme Pitches, head of business development for Consolidated Biofuels, which has a biodiesel refinery in Delta, B.C.
“It allows us to provide biodiesel 20, 30 and 40 cents a litre cheaper than renewable diesel,” Pitches said.
The one hurdle to more biofuel adoption in shipping is production and supply. Policy support and incentives are needed to support increased production and adoption of biofuels.
“Thankfully, in Canada, we do have that,” said Fred Ghatala, president of Advanced Biofuels Canada.
Biofuels qualify for compliance credits, he said. What is needed now, he said, is for B.C.’s low carbon fuel standard to be extended to the marine sector.
“That would be a very key piece — to allow low-carbon fuels to access the bunkering market,” Ghatala said. “Right now, you can’t generate compliance credits.”
His sector is hoping to see a revised CleanBC plan include the marine sector in its low carbon fuel standard.
“Tweaks to that regulation would really open the market for low carbon fuel production and finding its way onto vessels,” Ghatala said.
