Biofuel insetting: a strategic approach to decarbonization in maritime transport
The time is today
Freight transportation is a notable contributor to worldwide greenhouse gas (GHG) emissions. For instance, shipping is responsible for emitting roughly 1 billion tonnes of CO 2 e (CO 2 equivalent) annually on a well-to-wake basis. This makes maritime transport the perfect industry to start achieving decarbonization targets today, with an immediate transition towards clean and renewable energy sources.
Cargo owners play a key role
Cargo owners are increasingly compelled by customers and investors to reduce Scope 3 emissions and pursue decarbonization within their operations. Consequently, numerous cargo owners have begun embedding decarbonization objectives into their corporate strategies. Some are setting ambitious goals to achieve a carbon-neutral or carbon-positive status by 2040, or potentially even by 2030. This shift is likely to increase expectations for the shipping industry to enhance transparency and adhere to more rigorous GHG emissions reporting requirements across the logistics chain.
“Precision in decarbonization efforts is paramount for cargo owners. While we need voluntary actions to achieve climate targets, we need to apply trustworthy book-and-claim practices to ensure accurate insetting. Excellence and rigorous audits along the entire value chain play a vital role here.” – Sophie, Sustainability Manager at DB Schenker
Biofuels make the difference
Besides implementation of technical measures, achieving decarbonization goals requires a large-scale transition to new fuels. This is already underway, as seen in DNV’s Maritime Forecast to 2050, published in 2024. It presents a new and comprehensive global fuel production project database.
The usage of biofuel is an effective, yet more costly, way to reduce GHG emissions in the ocean freight industry instantly. Switching from fossil-fuel-powered shipping transport to sustainable biofuel will make an important difference to Scope 3 emissions for many cargo owners.
Benefits of using biofuels
- Biofuels can achieve GHG reductions thanks to advanced processes and sustainable feedstocks.
- Biofuels can be blended with conventional fuels or used as drop-in substitute fuels for conventional fossil fuels.
- As a drop-in fuel, biofuels can be directly used in existing installations without major technical modifications, making them very attractive for existing tonnage.
Biofuel insetting: a focused, effective measure
Shipping companies as well cargo owners therefore have an option to actively pursue substantial emission reductions through direct initiatives within their transport networks. This process, known as carbon insetting, is predicated on the principles of decoupling, mass balancing, and external verification. It enables organizations to implement focused measures to diminish their carbon footprint while preserving operational efficiency.
Biofuel insetting emerges as a key solution for shipping companies and cargo owners – providing a short and medium-term perspective on reducing their emissions and achieving compliance with international regulations and GHG reduction targets. Applying a book-and-claim system disconnects the transport and fuel from the cargo and service offered, allowing green services to be offered based on certificates, not the actual fuel used. This can help to accelerate the uptake of carbon-neutral fuels, as those that do not have direct access to the sustainable biofuel can buy the claim.
This approach creates a win–win situation for both parties, allowing them to reduce their actual CO 2 e emissions from operations and meet market and shareholder demands for emissions reduction.
The implications of biofuel insetting in maritime transport extend beyond mere emission cuts. It introduces additional benefits and new business models, notably the provision of green and sustainable services. What’s more, insetting offers a strategic pathway for shipping companies to contribute to global sustainability goals while enhancing their business practices. The cargo owner, who is willing to invest in the premium fuel, can claim the GHG reduction for themself only.
Navigating challenges in the absence of global standards
DNV Maritime Advisory supports the approach of decarbonization. However, a critical consideration emerges – one that underscores the need for robust third-party verification. While the commitment to reduce GHG emissions is commendable, ensuring credibility and transparency remains paramount. Since no global standards or a global accounting database exist, it is crucial to apply the most conservative methods and keep good track of the allocation of emission reductions. This is purely to avoid double claims of GHG reductions and greenwashing. The fact that many start-ups and platform providers are entering the market and offering book-and-claim services brings into play an additional uncertainty factor.
DNV Maritime Advisory is partnering with shipping stakeholders – cargo owners, ship owners and operators – to support them in backing up their claims with facts and details, assuring correct and trustworthy validation of the savings based on a transparent scientific approach. Important points here include ensuring that bunkering has taken place, that the biofuel was combusted and that there is a is fair comparison between the emissions from the sustainable biofuel and the conventional fuel (considering the fuel mix before biofuel introduction and the energy content).
Another very important topic is “additionality”: What are the additional savings from the use of biofuel? What is the baseline for comparison? This is indeed a very strongly debated topic and requires strong knowledge about maritime regulations and insights into a vessel’s compliance status.
The proof is in the ESG reporting
“There are similarities between both the MRV/DCS and the biofuel reporting approaches, but some significant differences need to be taken into account,” says Benjamin Witt, decarbonization expert in DNV Maritime Advisory .
The confirmation of the usage of biofuel for one specific vessel for the total amount of fuel bunkered should be the same for all reporting. However, when talking about an insetting statement, we talk about a more specific approach and here it is important to understand the cargo owner’s needs. Take the example of a container vessel: The shipping company will normally carry containers for different clients. Some clients will have commercial agreements for the usage of the “green service”. The GHG reduction is unique and owned by the cargo owner and cannot be used for others. This needs to be ensured and verified.
In addition, ESG reporting requires each cargo owner to report their own Scope 3 emissions in their company’s ESG report. This requires determining the specific amount of CO2 for their specific cargo. In most cases, a high-level MRV or DCS statement of the total fuel consumption will not be sufficient for this purpose. With the the EU Green Claims Directive, it is also essential to ensure that there are no double claims of emissions saved and to qualify values, such as the reference fuel used to create the saving, following the mass balance approach.
Rely on DNV Maritime Advisory
DNV Maritime Advisory is your partner to manage this complexity, ensuring trust and building competitive position with your biofuel insetting service. With deep insight and experience in the complexities facing the maritime value chain, we have supported several companies in the maritime value chain successfully over the last years. We offer a robust process tailor-made insetting verification service. The service covers all steps – from emission baseline, the inset process and system validation, sustainable fuel bunkering, carbon account validation, inset verification, issuance of verification statement and support regarding the green claim for Scope 3 accounting.
