The Case for Green Methanol in Reducing Shipping Emissions: Does it Merit Further Adoption?

Green methanol has emerged as one of the leading solutions for reducing shipping emissions. However, despite its apparent benefits in reducing SOX and NOX emissions, it’s still not carbon-free, while costs are still very high. In its latest weekly report, shipbroker Gibson said that “green methanol is often touted as one of the leading alternative sustainable fuels for the maritime sector. It is relatively easy to produce, most ports around the world can handle it, and being liquid at ambient temperature, it is cheaper to store than other alternative fuels like LNG or Ammonia which require cryogenic tanks. Nevertheless, it’s important to also evaluate its competitiveness against conventional fuels. Given the rising interest in alternative dual fuel vessels, green methanol’s adoption will inevitably encounter competition primarily from traditional hydrocarbon-based fuels. Rather unsurprisingly it doesn’t fare well in comparison with MGO from an energy density perspective; the energy density of methanol is 15.8 GJ/m3 whereas that of MGO is 36.6 GJ/m3, consequently methanol requires 2.4 times more space on board than its conventional counterpart”, the shipbroker said.

According to Gibson, “in addition to requiring more space on-board, green methanol is expensive when compared to VLSFO. Green methanol priced on a VLSFO equivalent basis is currently 4-5 times more expensive. This gap may be bridged by an increase in green methanol supply and higher carbon prices. Despite these current challenges, the medium to long-term outlook for green methanol is promising. With a significant surge in supply expected post-2025, driven by the establishment of several new production facilities and the expected increase in both the scope and pricing of carbon allowances, the economics of green methanol are likely to improve over time”.

“However, it is essential to acknowledge that green methanol is not carbon-free; CO2 emissions still occur upon combustion. Consequently, a CO2 multiplier of 1.375 must be applied compared to VLSFO’s 3.151. Overall methanol offers a 7-10% reduction in emissions (tank to wake basis) versus VLSFO. However, these savings in ETS offsetting requirements are eroded by higher bunker costs and currently only impact ships trading with Europe. Nevertheless, it offers significant environmental advantages, with a 99% reduction in SOX and a 60% reduction in NOX emissions”, Gibson said.

The shipbroker also noted that “for the methanol-fuelled fleet, box carriers reign supreme. More than 100 methanol fuelled container ships are slated to set sail by 2028, with a growing number of tankers and bulkers following suit. Additionally, a notable shift in newbuild ordering of dual-fuel ships is evident in the orderbook of vessels exceeding 25,000 dwt. From 2025 onwards, many newly commissioned ships will have dual-fuel capabilities, offering them the option to operate on a range of more sustainable fuels. This trend towards sustainable shipping underscores methanol’s position as a current frontrunner amongst other future fuels”.

Gibson concluded that “when considering cost-effectiveness, green methanol emerges as a competitive option compared to other future-ready fuels such as ammonia and LNG, particularly from a CAPEX perspective. However, in terms of emissions, it isn’t as green as the name suggests. Thus, there’s a delicate balance to achieve; green methanol is a practical means to lower emissions today but does not eradicate them entirely”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide