Shipping company Unifeeder has bunkered its first 100% biofuel, from energy company VARO at the Dutch bunker hub of Rotterdam, the companies said in a statement Feb. 8.
The transaction adds momentum to growing volumes of biofuel bunkered at Rotterdam as shipping tries to decarbonize.
“Being able to operate our vessels on 100% biofuel is a true game-changer and a major stepping stone on the Unifeeder Group’s journey towards net-zero emissions,” Hans Staal, director, for fuel supply at Unifeeder, said in the statement.
Bio-blend fuels accounted for over 300,000 mt at the port of Rotterdam in 2021, the port authority reported. This is the combination of fossil bunkers and bio-components, but the exact ratio was not known.
However, biofuel commands a significant premium over conventional petroleum-based fuel.
With carbon prices rising there is the prospect of this gap narrowing but supply remains problematic and this could support the premium.
Even with the prospect of the European Union including shipping in its Emissions Trading Scheme, biofuel is an expensive option.
In the waste-based biodiesel market, the UCOME [used-cooking oil methyl-ester] FOB ARA Outright price has increased 32% on the year to $1,863/mt on Feb. 7, S&P Global Platts data showed, as rising blending mandates in the road transport sector stimulates demand.
Another outlet that shipping must compete with for waste for feedstocks for biofuel is sustainable aviation fuel.
European Union Emissions Trading Scheme carbon prices have reached new all-time highs, surpassing Eur96/mtCO2e in early February, on the back of increasing demand from compliance entities amid ongoing investor interest in reforms to the carbon market and uncertainty over EU energy stocks.
S&P Global Platts Analytics expects daily EU carbon allowance prices to reach Eur100/mt in February, then to start easing with seasonal demand changes during spring. Platts Analytics does not expect policy intervention in either the EU ETS or UK ETS, as carbon prices remain below policy trigger thresholds.
One mt of fuel oil means approximately 3.1 mt of CO2 is emitted. Thus, levels of Eur92/mtCO2e would mean each mt of conventional fuel oil would incur a carbon price of Eur285 ($326) once carbon is fully priced in.
This means that even if carbon is fully priced into European fuel, at current levels, biofuel would still be over $800/mt more expensive.
If the shipping is included in the EU ETS according to the current roadmap, and its current shape is proving controversial, with industry voices criticizing the proposal, it would be gradual and so conventional fuels would remain even more competitive until 2026.
The European Commission’s legislative proposal forecasts CO2 emissions from shipping being included in the EU ETS from 2023 but with companies only having to surrender 20% of their obligation that year, rising to 45% in 2024, 70% in 2025 and 100% in 2026.
Source: S&P GlobalTags: Biofuel, Bunker, Unifeeder