Europe’s Shipping Sector Needs Guaranteed Contracts to Unlock Synthetic Fuel Supply

A 4.6-million-tonne synthetic fuel requirement facing European shipping risks going unmet unless producers can secure guaranteed long-term price commitments, Transport & Environment (T&E) has warned. The EU federation’s assessment points to a gap between the ambition of FuelEU regulations and the investment signals the market is currently receiving.

Under Brussels’ investment roadmap for clean transport, shipping must absorb that volume in under a decade. To close the cost difference between fossil and synthetic fuels, the EU is designing the SMAP mechanism within its Emissions Trading System. According to a CleanTechnica review of T&E analysis, the fund would provide €15 billion in support between 2028 and 2040.

T&E argues the current SMAP draft does not give e-fuel producers the foundation needed to sign offtake agreements. Synthetic fuel plants require heavy upfront capital, and without committed purchase contracts, most projects have yet to reach a final investment decision. T&E considers wider price-gap coverage a step in the right direction, but insufficient on its own.

The federation calls on the EU to carve out a dedicated quota share exclusively for synthetic fuels and to introduce a book-in-advance mechanism — an approach already embedded in the SAF Allowance proposals for aviation. T&E also cautions that SMAP must not subsidise short-term options already incentivised by current law. Without these measures, shipowners will continue to avoid multi-year supply agreements, blocking the timely build-out of production capacity the sector needs to meet its targets.

Source: CleanTechnica