Turning Challenge into Opportunity 2025

Shipping – the critical need for robust offtake in low-carbon fuel supply1.2 Shipping contributes 2% of global CO2e emissions.17Introduction With approximately 80-90% of global cargo transported by sea, and 99% of vessels currently operating on high-emission fuels, the maritime industry represents a critical frontier for decarbonization efforts.18 Amid technical debates around fuel choice, vessel retrofits, emissions standards and certification, among others, the most prominent question suppliers voiced was: who will buy low-carbon fuel, at scale, for long enough and at a bankable price? Offtake structures are the hinge on which first-of- a-kind projects turn – without credible demand signals, low-carbon fuel plants remain at risk of languishing in the pre-FID valley of death. As suppliers strive to scale up production of low- carbon fuels, such as green hydrogen, e-ammonia and e-methanol, offtake strategies have emerged as the cornerstone for both project bankability and sector-wide decarbonization. Three framing perspectives from discussions with low-carbon fuel suppliers set the stage: –Scale mismatch is pervasive. Project sizes range from pilots producing a few thousand tonnes to initiatives targeting over a million tonnes annually. Offtake commitments often do not align with project diversity, creating further market uncertainty. –Market mechanisms, including contracts for difference and book-and-claim systems, are emerging and offer promise, but are not yet mature or widely adopted. –Policy support is vital. Even optimistic buyers seldom sign long-term contracts at volumes or prices that satisfy project-finance lenders. With these observations in mind, two interlocking insights surface: 1. Long-term, risk-sharing offtake agreements form the backbone for scaling-up. 2. Flexible, aggregated demand models can overcome infrastructure and market fragmentation. Insight: Long-term, risk-sharing offtake agreements form the backbone for scaling-up For low-carbon fuel suppliers in shipping, the ability to scale up is largely predicated on one thing: locking in long-term commitments from buyers willing to share risk. These offtake agreements are not merely supply contracts but financing backbones that can allow producers to reach FID and secure capital for new facilities. Without them, suppliers often face financial, regulatory and operational uncertainties that stall investment and keep innovative projects on the drawing board. Four key “puzzle pieces” help illuminate why long- term, risk-sharing offtake agreements are crucial to help suppliers overcome first-mover disadvantages. Such agreements de-risk capital investment, while helping suppliers to navigate regulatory volatility, enhance the economic viability of their projects, and manage technology and production risks (see Figure 3). Four puzzle-pieces explain why long-term offtake is crucial FIGURE 3 How long-term offtake agreements help suppliers overcome first-mover disadvantages Navigate regulatory volatility Enhance projects’ economic viabilityDe-risk capital investment Manage technology and production risks Turning Challenge into Opportunity: Supplier Voices from Heavy-Emitting Sectors 15