Fueling the Future: A Novel Application of Econometrics-based Methods to Estimate E-Fuel Adoption in the Shipping Industry

Abstract

The global shipping industry, the backbone of international trade, is under pressure to reduce its substantial greenhouse gas emissions. Despite belonging to the so-called ‘harder-to-abate’ sectors, the industry requires a rapid transition from fossil to alternative fuels, in which innovative e-fuels will likely play a dominant role. Besides deriving empirical findings on the drivers of e-fuel adoption, this thesis intends to provide insights into methods for estimating the diffusion of emerging innovations within non-consumer facing industries. To do so, this thesis proposes a novel six-step econometrics-based methodological framework that combines existing innovation models into a comprehensive study of innovation adoption. Furthermore, this study determines a crucial tipping point of e-fuel adoption in 2032 at a relative adoption rate of 3.6%. Based on a proxy study of LNG adoption, an increasing price of conventional fuel oil, increasing public attention, increasing maritime earnings, and a decreasing cost of capital can accelerate the adoption of e-fuels. Besides highlighting the importance of first movers, cargo owners, and green hydrogen clusters, this study suggests that a carbon tax between USD 12 and 72/tCO2-eq in 2032 could, under ideal circumstances, be sufficient to bridge the competitive gap between fossil and efuels. The implications of this thesis are both theoretical, by advancing the academic discourse on the diffusion of emerging innovations, and empirical, by outlining a feasible path to maritime decarbonization by 2050.