Welcome to the new fuels normal
Dirk Kronemeijer discusses the move to more sustainable biofuels in the shipping sector
Time moves quickly in shipping. Just a few short years ago, biofuels were a marine fuel option being adopted by environmentally minded pioneers. Today, biofuels are in the mainstream, with a dramatic increase in demand leading to customers in an ever-wider range of countries and market segments trialing and adopting the fuel at scale.
If the first eight months of the year are any indicator, 2022 will be recorded as the point that this demand transitioned from speculative to permanent, driven by the increasing pressure on the industry to decarbonize and the industry scrambling to find immediate ways to reduce its emissions.
Companies turning to biofuels to decarbonize their activities now span all shipping segments, including dry bulk, containerships, tankers, ro-ro operators and, more recently, cruise operators. The sheer numbers of owners and operators throwing their hat in the ring prove that biofuels are no longer the preserve of a handful of first movers.
So far, this significant shift has mostly been driven from within the industry itself. Given the urgency of the climate crisis, consumers’ demands for better, greener practices are being sounded out loud and clear – and these consumers are increasingly putting their money where their mouth is.
As a result, industry giants have pledged to zero-carbon transport, and crucially they are ready to pay a premium to ensure their cargo is transported sustainably. In practice, the capacity to deliver carbon-free shipping is already a key factor in tenders and for when cargo owners choose their supply chain partners. Aware of the importance of sustainability for the supply chains of the future, investors are also closely monitoring companies’ ESG credentials when making investment and lending decisions.
The sourcing challenge
The acceleration of demand for low carbon fuels has led to a fundamental paradigm shift. We are now in a seller’s market, and the days of fossil parity are over. Increasing production and sourcing new feedstocks to ensure we can continue to respond to the industry’s needs are challenges that we must address today, not in some hypothetical future.
Huge effort is being expended on the part of suppliers like GoodFuels to ramp up production and find new sources of renewable bio-energy. We must also do this without compromising on sustainability, ensuring that all feedstocks are sustainably sourced and certified as 100 percent waste or residue.
For example, GoodFuels’ current stock of fuels can be composed of sustainable waste materials including sawdust, crude tall oil (a by-product of wood pulp manufacture), tallow, sewage sludge and used cooking oils from industrial applications. As demand expands, it’s inevitable that more sustainable sources will be transformed into advanced marine fuel.
On the customer side, the barrier to entry is low, which is proving to be a real differentiator versus other alternative marine fuels that are further off in terms of their development. Sustainable marine biofuels can ‘drop in’ to existing engines and infrastructure, without the need for any downtime. They require no technical changes on the part of the operator or crew but, critically, can make an immediate and measurable sustainability impact, slashing CO2, NOx and SOx emissions.
However, despite the increase in demand, it’s obvious that a broad range of future fuel options will be needed to help shipping achieve its radical decarbonization transformation. Biofuels will be one critical piece of the puzzle, but we are moving away from an era of commodity fossil-based fuels and into a more fragmented landscape that will see a plethora of renewable, sustainable, low and zero-carbon options bunkered around the world.
The internationalization of biofuels
On the biofuels front, it’s important to recognize that supply has now ‘gone global’ in a way that other alternative marine fuels are still aiming to do. From what began as an essentially Western European market, more regions are opening up. After all, a global industry needs globally assured supply. This is a key driver behind GoodFuels’ determination to cement our presence in Asia, with the opening of our office in Singapore earlier this year.
In addition to growing interest in Asia, there is also a significant and growing demand in countries like the United States, the United Kingdom and France, where more favorable legislation provides additional incentives for companies and suppliers.
The role of legislation in encouraging future fuels update can’t be understated. In order to truly decarbonize shipping, regulators must ensure that new legislation is goal-oriented and technology neutral, and does not allow for the preferential treatment of any technology unless it concerns the phasing out of fossil energy.
Partnerships based on trust
In this new normal, trusted and reliable partners are more important than ever, and independent validation and verification are key building blocks of that trust. All of GoodFuels’ biofuels are certified under the global International Sustainability and Carbon Certification (ISCC) system, ensuring true sustainability and transparency within the fuels supply chain. Additionally, the type of feedstocks GoodFuels uses are approved by an independent sustainability board, to make sure all of the company’s biofuels come from sustainable feedstocks that do not cause land-use issues, compete with food production or cause deforestation.
At the same time, technology is also likely to play a greater role in ensuring transparency and accountability. For example, blockchain technology can facilitate tracing and guarantee that the products genuinely meet all sustainability criteria.
The coming decade will be full of challenges as GoodFuels continues its work to meet the new normal demand for biofuels, but this also comes with fantastic opportunities to create new partnerships and have a tangible impact in more regions of the world. The planet cannot wait – to limit the impacts of climate change, we need decarbonization action to start today. And with biofuels, we have a powerful tool at our disposal to allow more cargo around the world to be transported carbon neutrally in the immediate term. Let’s work together to create the greener, cleaner future for shipping that we all want to bring about for our own businesses, our children, and generations to come.
Dirk Kronemeijer is CEO of GoodFuels, a Netherlands-headquartered global pioneer in sustainable marine fuels, with offices in Europe and Singapore. The company has created a one-stop shop for marine industry customers, integrating the entire supply chain for sustainable marine biofuels. From feedstock to tank, GoodFuels’ proposition covers elements of sourcing feedstock and ensuring its 100 percent sustainability, the production and refining, the global distribution, quality assurance and marketing programs with ports, governments, and cargo owners.