Energy Transition

Is green methanol the clean fuel the world is forgetting?

Green methanol is produced from low-carbon sources, can reduce carbon dioxide emissions, and be used not only as a transportation fuel but also as a feedstock.

Green methanol is produced from low-carbon sources, can reduce carbon dioxide emissions, and be used not only as a transportation fuel but also as a feedstock. Image: Unsplash/sergio souza

Gabi Thesing
Senior Writer, Forum Agenda
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Energy Transition

This article is part of: Centre for Energy and Materials

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  • Green methanol is produced from low-carbon sources, can reduce carbon dioxide emissions, and be used not only as a transportation fuel but also as a feedstock.
  • But it is also expensive, flammable and requires double the fuel tank size compared to its oil equivalent.
  • Investments in renewables reached a record high of $1.3 trillion in 2022, according to the World Economic Forum’s Fostering Effective Energy Transition 2023 report.

As the world continues to grapple with the effects of the climate crisis and the need to reduce greenhouse gas emissions, finding sustainable and low-carbon alternatives to traditional fossil fuels has become a top priority.

The focus has long been on electrification and hydrogen as potential replacements, but in recent years green methanol has re-emerged as a contender.

What is green methanol?

Methanol is a colourless liquid mainly used for producing other chemicals such as formaldehyde, acetic acid and plastics. It can be used as a fuel source for engines. Unlike traditional methanol, which is derived from fossil fuels, green methanol is produced from low-carbon sources such as biomass, or via carbon capture.


The benefits of green methanol

Compared to conventional fuels, green methanol can reduce carbon dioxide emissions by 60-95%, reduce nitrogen oxide emissions by 60-80%, and almost completely eliminate sulphur oxide and particulate matter emissions, according to the Methanol Institute.

What’s more, green methanol can be blended with traditional gasoline or diesel fuel, offering a seamless transition for vehicle owners and minimizing the need for infrastructure upgrades. This makes it an attractive option for countries and industries looking to reduce their carbon footprint without disrupting their current operations.

The production of green methanol also offers a range of environmental benefits. The use of renewable feedstocks means that the carbon emissions associated with its production and combustion are significantly lower compared to traditional methanol or fossil fuels. In addition, green methanol has a lower sulphur content, reducing emissions of sulphur oxides, which contribute to air pollution and acid rain.


What's the World Economic Forum doing about the transition to clean energy?

Another advantage of green methanol is its versatility. It can be used not only as a transportation fuel but also as a feedstock for the production of other valuable chemicals and materials. This opens up new opportunities for the chemical industry to reduce its reliance on fossil fuels and move towards a more sustainable and circular economy.

The market for green methanol is growing

Green methanol production is still low, with less than 0.2 million tonnes produced annually, versus 98 million tonnes of conventional methanol made from fossil fuels. This is likely to rise to 500 million tonnes by 2050, which would release 1.5 gigatonnes of carbon dioxide per annum if solely sourced from fossil fuels, according to estimates from the International Renewable Energy Agency (IRENA).

Figure illustrating the current and future methanol production by source.
Current and future methanol production by source. Image: IRENA

The market for green methanol is growing though, with several countries and industries recognizing its potential. In China, methanol is being used as a fuel for buses and heavy-duty vehicles. While in the maritime sector, methanol is being considered as a potential alternative to traditional bunker fuels. With global shipping responsible for 90% of world trade and 3-4% of greenhouse gas emissions, the sector is under increasing pressure to decarbonize, says the Financial Times.

And it’s not the only industry striving to make the switch – 2022 saw “investments in renewables reaching a record high of $1.3 trillion, a 19% increase from 2021 investment levels and a 70% increase from pre-pandemic levels in 2019,” according to the World Economic Forum’s Fostering Effective Energy Transition 2023 report.

In May, Orsted started construction on its $139m FlagshipONE plant in northern Sweden, which will produce 50,000 tonnes of e-methanol annually from 2025 for a global fleet of methanol-powered ships.

And in February, Canadian maritime company Waterfront Shipping said it carried out the world’s first net-zero transatlantic voyage, using methanol derived from hydrogen as its carbon-neutral fuel.


Concerns about green methanol

Green methanol doesn’t come without complications, however. Firstly, there is the cost issue: renewable methanol production costs are “still significantly higher’’ than those of today’s natural gas- and coal-based methanol production, says IRENA.

Renewable hydrogen-based maritime fuels such as ammonia and methanol will not beat fossil fuels on price until 2040, when capacity starts to catch up, according to one prominent shipping analyst.

Then there is the safety issue. Methanol is toxic, flammable and can be explosive; it must therefore be stored and handled carefully, according to marine insurers UK P&I Club. What’s more, “due to its density and lower heating value, methanol fuel tanks are about 2.5 times larger than oil tanks for the same energy content”.

Despite these obstacles, IRENA still sees green methanol as “one of the easiest-to-implement sustainable alternatives available, especially in the chemical and transport sectors”.

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