EU’s Proposed Shipping Subsidies Could Make BioLNG Cheaper Than Fuel Oil
Rystad Energy is an independent energy consulting services and business intelligence provider offering global databases, strategic advisory and research products for energy companies and suppliers,… Europe’s carbon market could soon start paying shipowners to switch fuels, but the support on offer is far from equal.
In July, the European Commission proposed a revision of the European Union’s Emissions Trading System that would reserve up to 110 million allowances between 2028 and 2040 for a new Sustainable Maritime Alternative Propulsion (SMAP) mechanism, which is meant to cover part of the price gap between fossil marine fuels and sustainable alternatives.
Rystad Energy’s analysis shows that, combined with the EU ETS itself and the FuelEU Maritime regulation, the proposal would reshape the cost ranking of marine fuels in Europe.
BioLNG and renewable e-fuels stand to gain the most, while biodiesel made from used cooking oil (UCO) and animal fats – one of today's most widely used marine biofuels – is left out.
From 2026, shipping companies surrender ETS allowances for 100% of their verified emissions in scope, now including methane and nitrous oxide, while FuelEU Maritime requires a steadily tightening cut in the greenhouse-gas intensity of energy used on board.
Both regimes rest on the sustainability rules of the EU’s revised Renewable Energy Directive (RED III).
For shipowners, charterers and fuel suppliers, the question is which fuel pathway the combined rules reward.
SMAP would cover 55% of the remaining price gap to fossil fuel for biogas and advanced biofuels, and 90% for renewable fuels of non-biological origin (RFNBOs) such as e-ammonia and e-methanol, with 10 additional percentage points where the feedstock is sourced in the EU.
Because support scales with the size of the gap, the most expensive fuels receive the most per tonne, and EU-made e-ammonia could see its entire remaining premium covered (Figure 1).
Support is halved on voyages into or out of the EU, and fuels generally must be produced in the EU or in a country with a linked carbon market.
Stacked together, the three instruments push several alternative fuels below the cost of very low sulfur fuel oil (VLSFO) on intra-EU voyages.
At 3Q26 prices, bioLNG costs more than twice as much as VLSFO before any incentives, yet it ends up at about half the cost of VLSFO once FuelEU credits and the proposed subsidy are counted.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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