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The Baltic Sea could become a leader in climate-smart shipping – but unclear regulations are slowing progress

2025-12-01

The Baltic Sea region has strong potential to take a lead in the transition to climate-smart marine fuels, but faces delays due to high costs and unclear political policy direction. This is highlighted in a new report from IVL Swedish Environmental Research Institute, in which Port of Luleå is studied.

The new report, which examines market conditions among the eight countries around the Baltic Sea, shows that hydrogen-based electrofuels – such as electro-ammonia and electro-methanol – will be crucial for meeting climate targets. Shipping is one of the sectors where transition to fossil-free operations is progressing slowly. The report shows that energy companies and ports see these new fuels as essential in the long term, but stakeholders hesitate to invest because of uncertainity about future demand or which fuel type will dominate. John Sundvall, Technical Director at Port of Luleå, confirms this and sees the development of renewable fuels as a necessity to meet future requirements from shipping companies and industry.

– In northern Sweden, a major energy transition in industry is underway, which could also benefit shipping. As a transport hub and one of EU’s strategically designated ports, we naturally want to contribute to this transition. It is possible to build infrastructure here for both bunkering and export, but for us to invest, the market needs to become more secure, he says.

The extensive survey shows that nearly 300 hydrogen-related projects are planned around the Baltic Sea, and several countries are positioning themselves as future producers and exporters – a key to achieving climate goals. Sweden and Norrbotten have particularly favourable conditions for developing electrofuels thanks to strong industrial clusters, fossil-free electricity production, and access to biogenic carbon dioxide.

– We have a lot to gain by building up domestic production of electrofuels. It strengthens energy security, creates new value chains, and could give Sweden a future export role for marine fuels, while shipping gains access to climate-smart fuels, says one of the report’s authors and IVL researcher Linda Styhre.

Knowledge base for renewable fuels in shipping

The report has been produced within the H2Derivatives@BSP project. In the Swedish part of the project, IVL Swedish Environmental Research Institute collaborates with Closer Lindholmen Science Park, LTU Business, Port of Luleå and Port of Piteå. The project is funded by Interreg Baltic Sea Region, with co-financing from the European Union and support from the Swedish Transport Administration.