Estimating the maximum potential vegetable oil demand for international shipping under the International Maritime Organization’s Net-Zero Framework

The International Maritime Organization (IMO) is about to vote for the adoption of its Net-Zero Framework that, if adopted, would apply to ships weighing 5,000 tons or more and which travel internationally. Under the framework, ships in scope would have to meet greenhouse gas fuel intensity (GFI) targets that limit how polluting their fuels are. These targets are split into two tiers and would get stricter over time, with ship emissions expected to hit net-zero levels by or around 2050. Under both tiers, ships that do not comply will face fines. Under the base compliance (Tier 2), a ship would pay a fine of $380 per tonne CO₂e or use banked credits from ships that have exceeded compliance requirements. Under direct compliance (Tier 1), a ship would pay a reduced fine of $100 per tonne CO₂e with no options to use banked credits.

As it’s currently written, the Net-Zero Framework does not specify which fuels can be used to comply and evaluates them solely on their life-cycle GHG emissions. This could incentivize the use of crop-based biofuels like hydro-processed vegetable oil (renewable diesel) that could pose sustainability risks outside of their direct supply chain emissions. Using modeling, this research brief estimates the potential demand from the marine sector for these types of biofuels and the amount of vegetable oils necessary to produce them.

Figure. Cost of compliance under the Net-Zero Framework for various biofuel types

The results show that the use of biofuels would be cost-effective relative to the base compliance cost under current LCA guidelines. Used cooking oil renewable diesel (UCO-RD) is the cheapest compliance pathway within the biofuels analyzed, followed by vegetable oil-based biofuels. Therefore, ships could first use UCO-based biofuels to comply with base emission targets and avoid higher fines. However, if all UCO used for biofuels today was immediately diverted to the maritime sector, there would only be enough to meet about 4.9% of energy demand from international shipping under the Net-Zero Framework. After that, ships would likely turn to virgin vegetable oil-based fuels. The demand for these fuels could reach as high as 46% of the energy demand from shipping in 2035. This would create a large new demand for vegetable oils that surpasses today’s supply used for biofuels in the transport sector. Because the supply of virgin vegetable oils is insufficient to meet the Net-Zero Framework targets beyond 2032, this would necessitate additional cropland for cultivation of feedstocks or their diversion from non-transport sectors.

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