Methanol is a colorless liquid used to produce other chemicals and as a fuel source. Green methanol, produced from low-carbon sources such as biomass, green hydrogen, or via carbon capture, is a sustainable alternative to traditional methanol and is gaining traction for its versatile uses. Green methanol is especially attractive to the transportation industry, which is recognizing its uses as a green alternative fuel while minimizing the need for infrastructure upgrades.

While production of green methanol continues to lag traditional methanol production due to cost and technical challenges, lowering costs of production with scale and wider adoption of Green Molecules™, such as green methanol and green hydrogen, in the shipping, materials, and energy industries have the potential to significantly reduce greenhouse gas emissions.

At Energy Capital Ventures®, we view green methanol as promising Green Molecules™ alongside others, like green ammonia, that can be used in myriad industries if technical hurdles and the cost of production are minimized. In this newsletter, we explore green methanol production, its applications, and key challenges shaping its future.

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The Case for Green Methanol

Green methanol is classified into two categories: bio-methanol and e-methanol.

• Bio-methanol is produced from biomass through gasification or pyrolysis and is categorized into four generations, each with varying sustainability properties.
• E-methanol is a synthetic fuel produced from green hydrogen combined with carbon dioxide from direct air capture (DAC) or flue gas capture.

Green methanol’s potential as an emerging Green Molecule™ is promising for the following reasons:

• Emissions reductions: According to the Methanol Institute, green methanol can reduce carbon dioxide emissions by 60-95%, reduce nitrogen oxide emissions by 60-80%, and eliminate sulfur oxide and particulate matter emissions.
  

• Sustainable fuel: Bio-methanol production from renewable feedstocks makes this a sustainably produced fuel that has the potential to be carbon-neutral due to reduced emissions from the use of green methanol.
  

• Infrastructure compatibility: Green methanol is highly compatible with existing infrastructure due to several factors. Methanol is a liquid state at ambient conditions making it easy to store, transport, and handle using existing fuel storage, pipelines, and distribution systems. Methanol can directly be used with Internal Combustion Engines and as a hydrogen carrier for fuel cells allowing for adoption in the wider transportation industry. It is also safer to handle and less volatile compared to other fuels such as hydrogen and LNG.

Green methanol has multiple uses that makes it an attractive clean fuel of the future:

• Shipping: Green methanol has the potential to significantly decarbonize the maritime industry. Green methanol significantly reduces greenhouse gas emissions which aligns with the International Maritime Organization’s decarbonization goals of reducing emissions by up to 30% by 2030, up to 80% in 2040, and achieving net-zero around 2050. Most compelling is green methanol’s compatibility with existing infrastructure – methanol’s liquid state at ambient conditions allows for seamless integration into existing bunkering and storage infrastructure with minimal retrofitting costs compared to costs associated with using LNG which needs to be stored in cryogenic conditions.
  

• Sustainable materials: Methanol is a key component of hundreds of everyday products including plastics, paints, construction materials, pharmaceuticals, and more. Green methanol can be used to produce sustainable materials that are not only sustainable but also biodegradable.  
  

• Energy: Green methanol is an effective liquid energy carrier for hydrogen and can address some of the challenges regarding hydrogen storage and transportation. Green methanol can also store excess renewable energy in tanks during periods of high energy generation and be converted to energy during periods of low energy generation. In a closed carbon cycle, carbon dioxide generated from the combustion of methanol can be recaptured to make more methanol, making this a sustainable process.
  

Combined, these factors make green methanol an attractive sustainable fuel and chemical feedstock, with the potential to play a major role in decarbonization and green hydrogen integration.

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Real-World Applications & Active Projects

As of 2023, the global green methanol capacity was 536,000 tons, well below the global methanol capacity of 170 million tons. North America leads green methanol production (75%), followed by Europe (15%), Asia (9.7%), and South America (0.2%).

However, the market for green methanol is growing with many countries and industries recognizing its potential. The Methanol Institute which tracks the bio-methanol and e-methanol project pipeline estimates the renewable methanol capacity will be in the range of 7-14 million tons by 2030 factoring in barriers and challenges in project development.

Below is a list of green methanol projects and developments which are indicative of growing interest and greater commercialization of this clean fuel:  

• Repsol’s investment in Ecoplanta Molecular Recycling Solutions: On January 29, Repsol, the Spanish multinational energy and petrochemical company which also produces chemicals, announced an investment of $834 million in a bio-methanol plant in northeastern Spain. The plant will be operational by 2029 and will be able to process 400,000 tons of municipal solid waste per year to produce 240,000 tons of bio-methanol and circular products. Repsol secured funding for this investment from the EU’s Innovation Fund for low-carbon technologies.

• Maersk’s Bio-Methanol Agreement: In October 2024, Maersk, the Danish shipping group and second largest shipping company in the world, signed a long-term sourcing deal with China LONGi Green Energy Technology to supply bio-methanol to its vessels. In a statement from Maersk’s COO A.P. Moller, bio-methanol and e-methanol were recognized as “the most promising alternative shipping fuels to scale up in this decade and the agreement with LONGi serves as a testament to this.”

• Honeywell and AM Green’s Agreement: On February 11, Honeywell and AM Green met at India Energy Week 2025 and signed a memorandum of understanding to advance carbon capture and sustainable aviation fuel in India. The collaboration will involve the companies assessing the techno-economic feasibility of producing sustainable aviation fuel from ethanol, green methanol, various carbon dioxide sources, and green hydrogen. The agreement contributes to India’s ambition to be an emerging exporter of reliable, sustainable, and cheap green molecules. With increased local production of green methanol, India is positioned to support decarbonization in hard-to-abate industries like shipping. This agreement also aligns the government’s National Green Hydrogen Mission to boost green hydrogen production through green methanol production for domestic and export use.

• Paysandú eFuels Project in Uruguay: In May 2024, HIF Global, a global leader in eFuels, selected Johnson Matthey (JM), a global leader in sustainable technologies, for the Paysandú eFuels project in Uruguay. HIF Global’s investment of $4 billion in the facility makes it the most significant investment in Uruguay’s history. The facility would be the largest e-methanol plant in South America producing green methanol from green hydrogen and waste carbon dioxide from an ethanol plant. Using JM’s e-methanol eMERALD technology which has been proven as a credible route to decarbonize methanol production, the facility will have a capacity of 700,000 tons and will supply the maritime industry provide feedstock to produce e-gasoline for vehicles. The plant is currently in a pre-feasibility or feasibility stage and is expected to start up in 2028.

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Key Challenges to Address

The following hurdles must be addressed before widespread production and adoption can occur:

• Lower energy density: Methanol has a lower energy density compared to other conventional fuels which means a larger quantity of methanol would need to be produced and be consumed to supply industries. Vehicles using methanol may have lower range and may cost more to use. Ships that operate on methanol may require larger fuel capacities to accommodate a larger fuel volume which in turn would decrease cargo capacity and cost efficiency.

• High cost of production: The current cost of production for green methanol is higher than for conventional fuels due to expenses associated with direct air capture of carbon dioxide and electrolysis-based production. The cost of e-methanol production is expected to decline faster than for bio-methanol production, however, commercial availability is dependent on how quickly emerging projects can begin full operation. Prices can be further lowered through incentives and carbon pricing mechanisms.

• Regulatory and Policy Uncertainty – While certain policies and incentives exist for the adoption of green methanol such as the FuelEU Maritime Regulation, Inflation Reduction Act, and local Chinese regulations incentivizing the use of methanol in vehicles, a lack of a global carbon pricing mechanism and political uncertainty may reduce the economic viability for green methanol and would present challenges for widespread adoption.

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At Energy Capital Ventures®, we see the potential of green methanol as a key Green Molecule™ and a promising clean fuel of the future. While strong investments signal market interest, addressing challenges related to energy density, production costs, and regulatory support will be crucial for large-scale adoption. If these barriers are overcome, green methanol could play a significant role in decarbonization and green hydrogen integration.

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