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Vessels retrofitted for ammonia fuel can cost less to operate than fossil fuel ships, finds CATF report

January 18, 2024 Work Area: Zero-Carbon Fuels

A new report from Clean Air Task Force compares fuel costs and emissions from ships built or retrofitted to use ammonia and finds that ammonia-fueled ship operators will have substantial flexibility in fuel use as they pursue decarbonization targets. 

“The vast majority of commercial ships built today will still be in operation in 2050, during the critical decades that the marine sector — which accounted for ~3% of global energy-related CO2 emissions in 2022 — needs to decarbonize to be in line with the Paris Climate Agreement,” said John Steelman, Deputy Director of the Transportation Decarbonization program at CATF. “Ammonia is considered a leading alternative fuel for this effort and our new report finds that ship operators of ammonia dual-fuel vessels could be well positioned to out-compete conventional heavy fuel oil-powered ships under emerging decarbonization requirements.” 

CATF has developed a set of economic tools for estimating the cost of producing and using low-carbon fuels in commercial shipping. Using these tools, the report, Managing the Transition to Zero-Carbon Marine Fuels, looks at key factors for producing low-carbon alternative fuels and opportunities for managing the costs of transitioning to low-carbon marine fuels, with an initial focus on ammonia. 

Consistent with ship and engine manufacturers’ projections and recent adoption by the European Union of marine sector targets for reducing emissions by 80% by 2050 (FuelEU Maritime), the report compares four ship investment scenarios:   

  • A newly built vessel powered by low sulfur heavy fuel oil (HFO) 
  • A newly built vessel fully powered by ammonia (NH3) fuel with HFO pilot fuel 
  • A retrofitted dual-fuel vessel with full range capacity to run on NH3 fuel 
  • A retrofitted dual-fuel vessel with reduced range capacity to run on NH3 fuel   

The report finds that with sufficient supplies of low-carbon ammonia fuel, a newly built vessel fully powered by ammonia could deliver a 77% reduction in lifetime emissions at the same lifetime cost as a conventional heavy oil-fueled ship that has to pay for its emissions. In a regulated market with a price on carbon, such as the EU’s Emissions Trading System (EU ETS), all three ammonia-fueled ships evaluated were able to comply with or outperform the new FuelEU Maritime targets at a cost equal to or below that of a conventional heavy fuel oil powered ship. Moreover, new ships can also be prepared for future retrofits to run on alternative fuels. 

As previously mentioned, the EU recently adopted greenhouse gas (GHG) intensity limits for energy used on board by a ship of 80% below 2020 levels by 2050 and agreed to expand the bloc’s emissions trading system to maritime shipping. Meanwhile, in the U.S., tax credits passed in the Inflation Reduction Act (IRA) will significantly reduce the cost of producing low-carbon hydrogen and ammonia and a new federal hydrogen hub program will help scale hydrogen-based fuel infrastructure, including at ports. 

Additionally, the International Maritime Organization (IMO), the UN agency responsible for regulating shipping, recently adopted a revised GHG strategy for shipping that sets a net zero emissions target “by or around, i.e., close to 2050, taking into account different national circumstances.” 

Steelman continued

“Emissions can be mostly eliminated from the marine sector largely by shifting from heavy fuel oil and marine diesel to zero-carbon fuels like hydrogen and ammonia. While this is an enormous undertaking, the technological path forward is reasonably clear and has been for some time now — what has been missing is the will among the shipping industry and regional and international regulators to require and implement the steps that need to be taken. This report makes it clear that they have cost-competitive options, now it’s time to choose.” 

Read the report here for a detailed description of research methods and findings. For more on CATF’s work in this space, explore our homepage

Press Contact

Steve Reyes, Communications Manager, CATF, [email protected], +1 562-916-6463

About Clean Air Task Force 

Clean Air Task Force (CATF) is a global nonprofit organization working to safeguard against the worst impacts of climate change by catalyzing the rapid development and deployment of low-carbon energy and other climate-protecting technologies. With 25 years of internationally recognized expertise on climate policy and a fierce commitment to exploring all potential solutions, CATF is a pragmatic, non-ideological advocacy group with the bold ideas needed to address climate change. CATF has offices in Boston, Washington D.C., and Brussels, with staff working virtually around the world. Visit and follow @cleanaircatf.

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