As part of its wider post-2030 EU ETS revision, the European Commission has proposed a new Sustainable Maritime Alternative Propulsion (SMAP) mechanism. If approved, it would reserve up to 110 million ETS allowances to help close the cost gap between conventional and renewable marine fuels. Here's what stands out to us.
How the support would work
Shipowners would claim allowances based on their use of eligible sustainable fuels and technologies in the prior year. The Commission would assess the price gap versus the fossil equivalent and allocate a share of allowances accordingly: 55% of the gap for advanced biofuels and biogas (RED Annex IX Part A feedstocks), 90% for RFNBOs, 80% for low-carbon hydrogen and other low-carbon fuels, and 90% of the additional cost for zero-emission propulsion technologies. Those allowances can then be sold or used to lower ETS compliance costs.
How this is worked into procurement may not be straightforward. The mechanism is not necessarily a fixed rebate of a set number of EUAs. The allocation is indexed to the perceived cost gap and an assumption would have to be made about the EUA price. The Commission was explicit that the value in the allowances would not necessarily equal the share of the cost gap it intends to cover. In practice it may still mean a fixed number of EUAs per tonne of fuel.
However, the value of the rebate is difficult to determine. Whether that fixed number is known before lifting will matter a great deal for fuel-type planning as there are possible forward contract solutions that could flatten price fluctuations. Either way, the real benefit will move with both the assessed price differential and the EUA price itself.
