The SMAP subsidy proposal from the European Union is being shaped to assist shipowners in transitioning to sustainable fuels. This program is specifically designed for bio-LNG and electronic fuels and could help reduce fuel costs in the maritime transport sector.
Details of the SMAP Subsidy
In July, the European Commission proposed a revision to the EU Emissions Trading System (EU ETS), under which up to 110 million permits are set aside for a new mechanism called SMAP between 2028 and 2040. This mechanism is designed to cover part of the price difference between fossil fuels and sustainable options. According to Rystad Energy's analysis, this proposal will significantly impact fuel costs in Europe.
Read more: China's Iron Ore Imports Increase to 967.8 Million Tons in 2026
Impact on Fuels and the Maritime Transport Industry
Starting in 2026, shipping companies will be allowed to offer ETS permits for 100% of their verified emissions, which now include methane and nitrogen oxides. Additionally, the FuelEU Maritime regulations require a continuous reduction in the greenhouse gas intensity of energy consumed on ships. SMAP specifically covers 55% of the remaining price difference for biogas and advanced biofuels, and this figure rises to 90% for renewable fuels of non-biological origin (RFNBOs) like electronic ammonia and electronic methanol.
However, liquid biofuels made from waste oils and fats, particularly biodiesel, have been excluded from this scheme, which could have negative impacts on the European biodiesel industry. By 2030, products like waste oils and non-food lipids are expected to account for about 96% of the biodiesel and renewable diesel production capacity in the region. This indicates that the maritime transport industry may not be able to significantly utilize liquid biofuels.
Ultimately, given the existing limitations, this subsidy may have a lesser impact on larger volumes. The SMAP budget is approximately $900 million per year, and if the number of applications exceeds the limit, payments will be proportionally reduced. Therefore, shipowners need to be prepared to take advantage of these subsidies to capitalize on the opportunities created.
Read more: Reduction of Sanctions by the Trump Administration in the Energy Sector · HD Korea Shipbuilding & Offshore Engineering Signed a New Contract for LPG Ship Construction
