Germany to promote construction of LNG bunker vessels at local yards

Germany has decided to stimulate the construction of vessels for bunkering liquefied natural gas (LNG) and renewable fuels.

With this move, the government wants to provide support to industry players to cope with the consequences of the COVID-19 pandemic in the maritime sector.

Furthermore, it wants to ensure more climate protection within the shipping industry.

“With the funding, we set clear incentives for the use of alternative fuels so that air pollutant emissions in shipping can be reduced,” Germany’s Federal Ministry of Economic Affairs and Energy explained.

The shipping industry is in a phase of transition due to environmental and climate protection requirements. In the long term, alternative fuels are to be used in shipping in order to reduce the sector’s emissions. The Federal Ministry of Economic Affairs and Energy is therefore promoting the construction of bunker vessels.

The funding guidelines were published on 26 October in the Federal Gazette.

As explained, the funding is intended to increase the number of bunker vessels and thus improve the infrastructure available for alternative fuels bunkering. This would result in greater uptake of alternative fuels.

The bunker vessels will be used flexibly in seaports — at transshipment locations or berths in Germany and the EU. The funding thus also contributes to the implementation of European law, which obliges the EU member states to expand the refueling infrastructure for alternative fuels.

Companies will have an opportunity to secure partial financing over a project duration of up to three years, with a grant rate of up to 40 per cent.

The condition is that the bunker vessel newbuilds are ordered at a shipyard with a permanent establishment or branch office in Germany and manufactured in the EU.

A total of €86 million (about $100 million) is currently available for this purpose in the federal budget for the years 2022 – 2024.

FuelEU Maritime

The funding is understood to support a wider EU strategy aimed to accelerate shipping’s decarbonization and the overall energy transition.

In the EU Green Deal, the European Commission announced it will increase the use of sustainable alternative fuels in shipping and ports in Europe with the FuelEU Maritime initiative.

Unveiled in July this year, the FuelEU Maritime proposes a common EU regulatory framework to increase the share of renewable and low-carbon fuels in the fuel mix of international maritime transport without creating barriers to the single market. In other words, it aims to address market barriers that hamper the use of sustainable alternative fuels and uncertainty about which technical options are market-ready.

The initiative is part of a ‘Fit for 55’ package to bring the sector in line with the EU’s ambition of climate-neutrality by 2050.

Germany’s climate neutrality ambition

As mentioned above, Germany wants to ensure greater climate protection in shipping with the newest funding for bunker vessels.

Namely, the federal government set an ambitious goal to achieve greenhouse gas (GHG) neutrality by 2045.

In June this year, the national parliament approved the amended Climate Change Act which was finalized by the federal council.

The amendment provides for raising the carbon dioxide (CO2) emission reduction targets. The target for 2030 is to be increased by 10 percentage points, to at least 65 percent. This means that by the end of the decade, Germany is to reduce its greenhouse gas emissions by 65 per cent of the 1990 levels. 

For 2040 the reduction target is a minimum of 88 per cent and by 2045 Germany is to become greenhouse gas neutral.