IMO: Fuelling deforestation

The International Maritime Organization (IMO) has set ambitious targets to achieve net-zero emissions by/around 2050, however, the specifics on how to reach that objective remain to be decided.

One approach is to incentivise ships to switch to alternative fuels via the Global Fuel Standard, but in the absence of clear criteria on biofuels, this framework could actually worsen shipping’s climate impact.

Nearly a third of global shipping could run on biofuels in 2030. Palm and soy oil could make up nearly two-thirds of the biodiesel used to power the shipping industry in 2030 as they represent the cheapest fuels to comply. This is a problem as palm and soy oil-based fuels are associated with indirect land use change emissions which makes those fuels' climate impact worse than heavy fuel oil – the typical shipping fuel used today. 

In total, the GFS could result in an additional 270 Mt CO₂e emissions in 2030 compared to the current fossil fuel mix.

The study shows that a biofuel-dependant shipping industry would need vast amounts of farmland. Around 35 million hectares in 2030 -- the total area of Germany – could be needed to produce enough crops to meet the increased biofuels demand from the shipping industry.

Many in the shipping industry state that they will use waste biofuels instead such as used cooking oil, animal fats, or agricultural residues. But waste biofuels will only be able to cover a small proportion of shipping’s projected biofuels demand as their availability is limited.

As part of its 2023 GHG Strategy, the IMO agreed to deliver a package of rules that will compel ships to reduce their climate impact to eventually reach net-zero emissions by or around 2050. Achieving this objective partly rests on the Global Fuel Standard (GFS), a framework that will compel ships to gradually switch from fossil fuels to cleaner alternatives by meeting GHG intensity targets on their energy use.

As biofuels facilities are already set up, biofuels are likely to be the first alternative shipowners turn to to reduce their GHG emissions. This trend could continue if IMO member states fail to agree on early political and financial incentives to promote green e-fuels within the GFS or enforce energy efficiency measures.

While some biofuels could indeed bring climate benefits, the majority of those currently available globally come with significant environmental and climate impacts ranging from direct and indirect GHG emissions. Food security is another major concern. 

Some of these issues have led countries such as Norway, France, the Netherlands and others to restrict or ban biofuels produced from feedstocks such as palm or soy. In addition, regulations such as FuelEU Maritime and RefuelEU exclude the use of feed- and food-based biofuels.

To estimate the potential uptake of biofuels resulting from the GFS – and the potential feedstock used to meet that that demand – we modelled a simplified fuel mix assuming that the overall shipping fuel mix would meet the GHG fuel intensity “striving” targets from the EU & Japan IMO proposal (ISWG-GHG 17/2/2). 

In the absence of established fuel emissions factors at the IMO, we used the fuel emissions factors from FuelEU Maritime Annex I. Our model concludes that biofuels could make up 36% of the global fuel mix by 2030, with that share increasing to 59% by 2035 and 76% by 2040.

ILUC is the acronym for indirect land-use change, and refers to the GHG emissions resulting from the displacement of agricultural production – for food and feed purposes – when land is used instead for biofuel crops. Expanding land for crop planting often occurs at the expense of carbon-rich environments (e.g. natural lands, forests) resulting in a loss of carbon stocks. As a consequence, a significant quantity of GHG emissions stored in the vegetation and soil is emitted in the atmosphere.

ILUC emissions are an important variable to consider when assessing the GHG profile of biofuels, as some are associated with high-ILUC emission factors that can negate their overall GHG savings. ILUC emission factors can be assessed and quantified via modelling, and have already been included in LCA regulatory frameworks, including at the global level. For example, the CORSIA LCA emission values include ILUC factors to determine the GHG impact of aviation’s alternative fuels. Similarly, the EU Renewable Energy Directive (RED) acknowledges the impact of ILUC emissions and sets a maximum threshold for relying on food and feed crop-based biofuels.

ILUC emissions will be discussed in the GESAMP group and will be considered from a qualitative or risk-based approach whose specifics remain vague (MEPC 83/7/1). While some members consider this approach appropriate, many have pointed out its shortcomings. In fact, a qualitative approach is likely to be too specific to take into consideration the GHG impact of ILUC emissions which will instead be based on contextual factors that are subjective and challenging to assess and certify.

Under the unrestricted scenario, palm and soybean oil could make up 60% of the global biodiesel feedstock mix by 2030, with rapeseed oil making 20% and the rest being fulfilled by smaller quantities of UCO (10%), animal fat (8%), and cellulosic residue (2%). From 2035 until 2040, the share of palm and soybean oil reduces, eventually reaching 15% of the global biodiesel feedstock share by 2040. This is mainly due to the emissions factors assigned to these feedstocks, which remain the same across the period (53 gCO₂e/MJ for palm oil and 48 gCO₂e/MJ for soybean oil), being too high for operators to meet GFS targets. Due to their limited availability, waste-based feedstock quantities remain relatively constant across the years, except for a small increase of cellulosic feedstocks. Most importantly from 2035 onward, the share of hypothetical biodiesel feedstock increases significantly up 52% by 2040. This is due to the uncertainty of where those feedstocks could originate from if these had to be bio-based.

The large share of palm and soybean oil under scenario 1 is driven by their affordability compared to any other types of oils, whether it is other vegetable oils or waste oils. Such a large share of palm and soybean oil would have negative consequences for climate change. In fact, Cerulogy estimates that by 2030 emissions from palm and soybean oil combined to other feedstocks could result in GHG emissions 87% higher than if these ships relied on fossil fuels instead. Those emissions would still be 21% higher than fossil fuels by 2035, and would only decrease significantly by 2040.

Agricultural land is required for fuels produced from whole maize, soybean oil, palm oil, rapeseed oil and cellulosic crops and residues. In the first scenario where all feedstock is allowed, Cerulogy estimates that the total biofuel production would require the equivalent of 35 million hectares by 2030.

Considering the growing competition over waste-based biofuels notably from the aviation sector, relying on feedstocks such as UCO or animal fat will only offer short-term relief. While several shipping companies have decided to rely on biofuels produced from UCO and animal fat, quantities for those feedstocks remain limited and the growing demand from shipping and other industries will result in price increases.

Across all scenarios, Cerulogy estimates that the demand for UCO and animal fat would quickly exceed available supply by 2035. To access the estimated shipping demand for UCO – ranging between 10.9 and 13.7 Mt/year across all scenarios – the shipping sector would need to gain preferential access to these resources which is unlikely to happen in the near-future. It is worth highlighting that there are suspicions that virgin palm oil is being used as a UCO feedstock, which has prompted several countries to launch investigations. 

Today, it is unclear how certification processes can accurately certify the feedstock used for UCO, given the large number of production sources, and the difficulty to differentiate UCO from virgin palm oil when tested as a final product.

In its simplified fuel mix modelling, T&E estimates that biomethane and biomethanol will make up a small share of the global biofuel use, accounting respectively for 1% and 0.7% in 2030. While the share of biomethane use would gradually increase as more LNG-powered ships come into service and switch to biomethane (making up c. 10% of the total fuel mix by 2040), biomethanol use is set to remain limited unless the volume of new methanol-capable ship orders picks up significantly.

Across all scenarios, the two feedstocks used for biomethane and biomethanol production are manure and whole maize. While manure is an agricultural waste product, the emissions savings of this feedstock vary considerably depending on the production practices. Similarly to cellulosic residues, manure is already used for other purposes such as biogas production to power farming operations as well as a fertiliser.

Whole maize is a feedstock that could instead be used for food and feed purposes. When used for biomethanol production through a reforming process, whole maize's overall GHG profile is 140 g CO₂e/MJ – the third highest emission profile in this analysis, after palm and soybean oil used for biodiesel production.

This briefing highlights the climate risks linked to an uptake of biofuels associated with high-ILUC emissions, showing the consequences that could happen if a lenient regulatory frame around the use of biofuels was agreed upon under the GFS or the LCA guidelines. It also highlights the limited role that biofuels produced from waste materials such as animal fat or UCO could play in the future. Given those circumstances, T&E recommends to: