How EU Contracts for Difference can support zero-emission fuels

May 2022

EU Fit for 55: ‘Contracts for Difference’ can incentivize zero-emission fuel investments and accelerate the shipping sector’s decarbonization transition

Zero-emission fuels and vessels must start being deployed at scale over the next decade to achieve full decarbonization of the shipping sector by 2050. By strategic utilization of shipping emission revenues, the EU ‘Fit for 55’ plan can trigger zero-emission shipping fuel investment and have the EU lead the way towards zero-emission shipping by mid-Century.

Getting to Zero Coalition Insight Brief, How EU Contracts for Difference can support zero-emission fuels, outlines how the EU could use shipping related Emissions Trading System (ETS) revenues to fund a program of targeted Contracts for Difference (CfD) to incentivise private investment into the production and use of zero-emission shipping fuels.

A previous Insight Brief recommends that EU policy should be designed and implemented with reference to the Getting to Zero Coalition’s target of having commercially viable zero-emission vessels operating along deep-sea trade routes by 2030, with at least five per cent scalable zero emission fuels (SZEFs) in international shipping.

However, a key barrier to achieving this aim by 2030 is the significant competitiveness gap that exists between fossil fuels and zero-emission fuels. According to the newly published Insight Brief, a portion of this cost gap will be reduced by the EU expanding its Emissions Trading System (ETS) to include shipping.

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