Why e-methanol is a game changer for decarbonizing shipping and industry

Worldwide, policy-makers and industry leaders are ramping up the decarbonization of “hard-to-abate” sectors such as shipping and the chemical industry.

While electrification has advanced this process for passenger cars, buildings and some industries, it remains challenging for energy-dense and high-temperature applications.

This is where electro-methanol (e-methanol) stands out.

Produced by combining green hydrogen with captured carbon dioxide, e-methanol has a closed carbon cycle: it only emits the carbon dioxide (CO2) it captures during production.

As both a sustainable shipping fuel and a chemical feedstock, e-methanol offers a path for some of the toughest decarbonization challenges.

Global shipping currently accounts for around 3% of global CO2 emissions, with the potential to rise without more robust action. The International Maritime Organization (IMO) has responded with its 2023 greenhouse gas strategy, demanding a 20% reduction in shipping emissions by 2030, escalating to 70-80% by 2040.

Meanwhile, the chemical industry, which relies heavily on methanol as a precursor to many of its products, represents another emissions-intensive sector that must rapidly clean up its supply chains.

E-methanol’s dual role as a marine fuel and chemical feedstock aligns perfectly with these urgent demands. Its versatility makes it a tangible near-term solution that can be integrated into existing infrastructure, particularly in ports and chemical manufacturing hubs.

E-methanol production typically involves three key steps:

Assessments on early commercial facilities such as FlagshipONE in Sweden show that e-methanol can achieve net emissions as low as -1.3 kilograms (kg) of CO2 per kg of fuel with carbon capture credits, making it carbon-negative. Even when considering transport and combustion – the “well-to-wake” method of assessing emissions – e-methanol remains cleaner than fossil fuels.

The shipping industry is set to be e-methanol’s first major user. With 19.9 megajoules per kg energy density, it works in modified marine engines and suits long-haul routes. Retrofits let shipowners upgrade fuel systems without costly vessel replacements.

Methanol-fueled vessel orders surged by 88% in 2023, demonstrating growing confidence in the sector. Major players such as Maersk have already commissioned multiple container ships that will run on methanol; each expected to slash annual CO2 emissions by approximately 1 million tons.

Moreover, Horizon Europe-funded initiatives such as POSEIDON demonstrate near-complete combustion efficiency and significantly reduced nitrogen oxide emissions, underlining the fuel’s promising environmental profile.

Methanol is a building block in countless chemical processes, from plastics to textiles. Traditional production can emit up to 3 tons of CO2 per ton of methanol but e-methanol can be a substitute that decarbonizes the supply chain without changing downstream processes.

As carbon pricing increases – predicted to reach €150 per ton in Europe by 2030 – the economic case for e-methanol becomes even more compelling.

Despite remarkable progress, e-methanol remains two to three times more expensive than its fossil counterpart, with production costs hovering north of $1,000 per metric ton.

Several factors drive this disparity, including the price of renewable electricity and the efficiency of water electrolyzers.

Traditional mega-scale methanol plants, which can cost up to $2 billion and take years to build, are increasingly giving way to modular e-methanol plants.

These smaller, modularized systems can be sited closer to CO2 sources, slashing transportation costs and smoothing the pathway for industrial clusters to share carbon capture infrastructure.

The European Commission’s Carbon Capture and Storage Directive further incentivizes such collaboration, indicating that the future of e-methanol may lie in distributed networks rather than centralized behemoths.

One example of modular design and novel integrated capture technology is ICODOS’ Horizon Europe-funded project UP-TO-ME. It brings production closer to CO2 sources and optimizes each step of the process to help lower overall costs, demonstrating a viable pathway to large-scale adoption.

A supportive policy environment is crucial for e-methanol to achieve mainstream adoption. Key levers include:

Collaborations are also proliferating. The EU’s Net Zero Industry Act has spurred cross-border partnerships and investment vehicles such as Germany’s H2Global initiative, which is catalysing hydrogen imports specifically for e-fuel production.

Meanwhile, China’s Ningxia Baofeng Energy operates the world’s largest e-methanol plant at 600,000 tons annually, highlighting the Asia-Pacific region’s growing export capability.

Forecasts suggest that e-methanol capacity could expand by more than 20% annually over the coming decade, propelled by policy mandates, improving technologies, and rising demand from the shipping and chemical industries.

By 2035, experts predict e-methanol could meet 60% of the chemical sector’s methanol needs, provided carbon pricing and infrastructure investments keep pace.

However, success depends on innovating electrolyzers, CO2 capture and supply chain coordination. In the long run, integrating renewable power, carbon capture and methanol production is key to reducing costs and maximizing environmental benefits.

The emergence of e-methanol could be timely in a race to achieve net zero through a just, inclusive energy transition.

With robust collaboration between governments, industry and research institutions, e-methanol can scale beyond pilots to become a powerful engine of change for our most emissions-intensive sectors.