Wherever you go, decarbonisation is dominating maritime conversations. Simply count the number of headlines and industry events focused on tackling carbon emissions or consider the significance of initiatives like the ‘Getting to Zero Coalition’, which has gathered support from more than 80 leading global companies. The International Maritime Organization’s (IMO) April 2018 decision on Greenhouse Gases (GHGs) was a defining point for the shipping industry.
Shipping is listening and starting to act. There is a growing group of leading shipowners whose customers are demanding more from them and so they're wanting to do more. However, the bigger question is whether shipping’s ambition is great enough, as there is still a gap when it comes to understanding how sustainability equals success and what this can mean for business. This requires an understanding that change will be driven by the market, technology and innovation, as well as regulation.
Business planning and models will need to embrace longer-term thinking, with the maritime industry looking beyond the global trade landscape and developing incentives that spur action beyond regulatory compliance. This transition that will drive new ways of doing business - altering the allocation of costs in the supply chain, encouraging investment in clean technology as well as demonstrating that transparency and change through partnerships – and can transform the market to a sustainable shipping supply chain. It will also make good business sense with those showing leadership enjoying a competitive advantage.
However, one cannot negate the current backdrop of industry uncertainty around how this transition will evolve - there are many options and as yet no standout winners, never mind the level of investment into the fuels and technology to ensure that they are optimised for ship applications and available in sufficient quantities. The move away from fossil-based fuels at sea requires the land-based infrastructure to support their production, supply and use.
In the short-term, reducing emissions is changing the way we operate ships as we harness efficiencies. Furthermore, batteries and on-shore power supplies are already playing an important role in supporting this transition and easy-to-store zero or low-carbon fuels (for example sustainable biofuel and methanol) are being trialled by industry leaders like Denmark’s Maersk and France’s CMA CGM as existing infrastructure and machinery can easily be adapted to facilitate their use.
However, further down the road, meeting the IMO’s GHG ambitions means fuels derived from renewable electricity, natural gas with Carbon Capture Solutions (CCS) or biomass will be required because they have net zero emissions across their whole lifecycle from production through to operational emissions. According to Lloyd’s Register (LR) research, zero-emission vessels (ZEVs) must enter the global fleet by 2030 to meet the IMO’s GHG ambitions – and therein lies our industry’s biggest challenge.
We believe that to achieve this, industry players will need to collaborate, not only with their current industry partners but with new partners – including fuel technology companies, equipment manufacturers and energy developers from different sectors so we can develop, prove, scale and commercialise ZEVs.
Success will inevitably require the right conditions to enable change. This relies on the overlap of three elements – technology readiness, investment readiness and community readiness. We need to assess whether the technology is mature and can be safely deployed, evaluate the economic case and consider if we are meeting societies’ needs and expectations.
LR and Maersk have produced a study which assesses the transition to zero carbon fuels and has identified that the cost of transport will rise – not because ships themselves will require greater levels of investment, but because new fuels are projected to be significantly more expensive than existing fossil fuel solutions and will therefore lead to increased operating costs. Furthermore, achieving net zero will predominantly be an operating expense (OPEX) rather than a capital expenditure (CAPEX) challenge - ships will have to adapt, potentially requiring new fuel tanks, modified engines and fuel supply systems, but this will be a very small element of the total cost of operation.
We project that future fuels are likely to be two to three times more expensive to produce compared to today’s cheapest marine fuels and our joint modelling exercise with Maersk points to alcohol, biomethane and ammonia as the best positioned candidates to focus research & development towards zero net fuels. All three of which come with pros and cons and as these carbon neutral fuel configurations have relatively similar cost projections at this time, one cannot determine clear winners purely from a cost point of view.
The industry can expect to see more countries develop and implement national action plans to address GHG emissions, with more ports introducing zero emission incentives to ships operating in their waters. Funders will need to align their new and existing businesses activities with international climate goals - like they did with the Poseidon Principles earlier this year.
The challenges ahead may be significant, but they present an opportunity for stakeholders across the entire maritime supply chain to collaborate to deliver the goals defined. In confronting this transition, shipping can decide its preferred future direction rather than leaving others to determine the road ahead.