An international body that regulates ocean shipping is preparing to finalize a cap-and-trade system for reducing greenhouse gas emissions that offers a potential new market for biofuels made from agricultural feedstocks. This despite objections from the Trump administration.
Biodiesel and a liquified form of renewable natural gas (RNG), known as bioLNG and produced from manure or landfill gas, are among the fuels that shippers could adopt under the system developed by the International Maritime Organization (IMO) and scheduled to be finalized at a meeting next week.
“We think it's going to have a really positive impact for renewable fuels," said Ben Kruger, senior vice president of renewables for Roeslein and Associates, a St. Louis-based company that designs, builds and operates RNG facilities. "In fact, by certain estimates, we think the demand for renewable fuels in the maritime sector could be as high as 25 million metric tons around the world by 2030 and represent as much as a third of all of the biofuel demand globally.”
The industry uses about 300 million tons of fossil fuels annually.
The IMO system, known as the Net-Zero Framework, includes limits on greenhouse gas emissions. Ship companies that don’t hit the targets will have to buy credits or use their own banked credits to meet their obligations, or they will face penalties. The plan would require shipowners to achieve a 21% emissions reduction by 2030 and a 43% reduction by 2035.
There is considerable uncertainty on how significant the market could be for biofuels. Industry officials say the size of the potential market will depend in part on how ag biofuels are scored for their carbon footprint, which will in turn depend on how impacts on indirect land use change are assessed.
Biofuels also are expected to need significant support from U.S. government policies and subsidies to be competitive, and to that end industry allies in Congress are working to pass legislation this year that would make maritime fuels eligible for credits under the federal Renewable Fuel Standard (RFS).
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A modest amount of biodiesel already is being used in ships, based on the number of RFS credits that have been retired because they were used for maritime fuels.
Some 13.89 million Renewable Identification Numbers (RINs), the equivalent of 9.5 million gallons of biodiesel or renewable diesel, were retired in 2024 because the fuel was used in ships, up from the 40,000 RINs retired in 2020,
“The demand for the fuel is there,” said Paul Winters, director of public affairs and federal communications for Clean Fuels Alliance America, which represents producers of biodiesel and renewable diesel.
Ben Kruger (Roeslein photo)“You know, our producers are trying to develop new markets. California is kind of reaching a saturation point on demand for biodiesel and renewable diesel. So new markets are definitely required.”
Speaking on an Agri-Pulse Open Mic interview, Kruger said biofuels could produce $5 billion to $10 billion in revenue for rural areas by 2030 and make up for the lost soybean markets in China. Eventually, the market “could be two or three times the size of the Iowa soybean crop. So, it's a really big deal.”
Administration denounces IMO plan as 'carbon tax'
The Trump administration’s denunciation of the IMO plan isn’t expected to stop it from being implemented next week, although it could have an impact on U.S. policy.
Secretary of State Marco Rubio, Energy Secretary Chris Wright and Transportation Secretary Sean Duffy issued a joint statement in August calling the IMO plan “a global carbon tax on Americans levied by an unaccountable UN organization." The statement goes on to assert that one of the plan's problems is that it would preclude the use of biofuels.
“Our fellow IMO members should be on notice that we will look for their support against this action and not hesitate to retaliate or explore remedies for our citizens should this endeavor fail,” the statement concluded.
An official in the RNG industry who spoke on condition of anonymity says it remains to be seen what impact the administration's stance will have given the global support for the emissions standards. “There are a huge ecosystem of countries out there that are invested in the process,” he said.
According to the American Biogas Council, 68% of U.S. RNG comes from landfills and 24% from dairy and hog operations. The remaining 8% is generated from wastewater treatment and other sources.
The Trump administration does, in fact, see the shipping industry as a market for farm-based biofuels. During a recent speech in North Carolina, Deputy Agriculture Secretary Stephen Vaden said the administration is "having conversations with international partners about synthetic aviation fuel, as well as using biofuels in maritime." He didn't elaborate.
The IMO standards also have the support of shipping giants such as Maersk, which supports requiring all new ships to be capable of operating on green fuels. Maersk is ordering new dual-fuel ships that can operate on methanol and liquified gas. Once the ships are delivered, they will account for 25% of the company’s fleet.
Maersk says in a statement that it “foresees a multifuel future for the industry which includes liquified bio-methane,” which can be made from manure gas as well as other sources.
“Bridging the cost gap between fossil fuels and low-GHG emission alternatives is critical — and it demands firm regulatory support,” Maersk CEO Vincent Clerq said in a statement.
Shipping industry questions whether U.S. farmers can meet demand
The 45Z tax credit created by the Biden-era Inflation Reduction Act and extended in President Donald Trump’s One Big Beautiful Bill Act will help subsidize biofuels. But the industry also is hoping to win passage this year of the bipartisan Renewable Fuel for Ocean-Going Vessels Act, sponsored by Sens. Pete Ricketts, R-Neb., and Amy Klobuchar, D-Minn. The bill would allow biofuels used for ocean shipping to start earning RINs.
The bill “would expand agricultural marketplaces, enhance American energy security and create parity for maritime fuels with over-the-road and aviation fuel types in the Renewable Fuel Standard,” said Ricketts.
The Chamber of Shipping of America, which represents U.S. ship owners and operators, supports the bill as part of an “overall strategy to address decarbonization for marine transportation” but is concerned there may not be sufficient biofuel volumes, a representative of the group told the Senate Environment and Public Works Committee at a recent hearing.
Kathy Metcalf (LinkedIn photo)The shipping industry is “going to be in direct competition with land-based users, and there's some concerns globally and also within the United States as to whether the quantity is going to be available in sufficient measure,” said Kathy Metcalf, a former president of the organization.
Nikita Pavlenko, who is fuels and aviation program director for the International Council on Clean Transportation, a group that has questioned the environmental benefits of many biofuels noted at the hearing that aviation biofuels are already eligible for the RFS but still haven’t gotten much uptake.
He said the bill would likely have a “negligible impact on reducing the air pollution, climate impacts from maritime fuels.”
Biofuel industry officials say the shipping industry is going to need products like biodiesel, renewable diesel and RNG, it’s just a question of where they get them.
“It's all a matter of whether they purchase the fuel in other countries before they get to the United States, or whether they are able to purchase the fuel” in the U.S., said Winters.
If the U.S. doesn’t get behind the maritime market, “it's going to go other places. You'll have Europe, Asia, and to some extent, South America will ultimately have most or all of this market, and we'll be in a position where we're not competitive or we're not capable or both, and we're left out,” said Kruger.
Updated Oct. 9 with American Biogas Council data on RNG sources.
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