The shipping industry’s largest decarbonisation alliance has laid out the blueprint on how to develop a zero-emission vessel in deepsea trade by 2030.
In its latest research paper, the Getting to Zero Coalition said industry participants should collaborate more on the whole supply chain to begin operating such ships on a pilot basis.
Moreover, to make zero-carbon shipping commercially viable, the coalition suggested that investment and operational costs should be passed all the way down to consumers while governments also need to help.
“We are confident that a first wave of commercial-scale end-to-end zero-emission pilots can be launched within the next five to ten years,” said the coalition, comprising more than 120 companies that include shipowners, charterers, fuel suppliers and technology developers.
“Achieving this goal will require enhanced collaboration across the maritime value chain and targeted support from key governments to boost the technological and commercial viability of the projects.
“Success will bring a scale-up of zero-emission shipping into sight.”
To achieve the International Maritime Organization’s target to chop greenhouse gas emissions from international shipping in half by 2050, most in the shipping industry believe new types of fuels need to be developed.
Sharing the costs
Getting to Zero Coalition, which was launched via the Global Maritime Forum in 2019, has concluded the first movers will face much higher costs in shifting to zero-emission fuels. But not all expenses will be shared equally on the supply chain.
Assuming that the industry will move to adopt hydrogen, ammonia or methanol, 75% to 90% of the capital expenditures for an end-to-end pilot project will be related to land-based fuel production, the coalition’s study found.
The report suggests that shipping companies may enter offtake agreements to kickstart the production of new fuels, so that risks can be diversified across multiple sectors.
“Shipping’s decarbonisation cannot be achieved without collaboration. Forming consortiums will allow first movers to cooperate easily,” said Randy Chen, Wah Hai Lines’ director and vice chairman.
But the report also stresses that shipowners will need to be able to pass additional investment and operational costs onto charterers and all the way down to consumers through what it describes as “green fuel premium” mechanism.
“Shipowners will be reluctant to invest in new technologies…without assurance that there is a market where they can get paid for the additional costs from charter contracts,” Star Bulk Carriers chief strategy officer Charis Plakantonaki said.
Roles for consumers and governments
Given that freight costs are generally a small portion of consumer good prices, the report suggests that end-consumers would only need to tolerate a “relatively low” price increase for the shift to zero-emission shipping.
“Despite the higher business to business costs of operating zero emission vessels, the impact on end consumer prices is likely to be limited,” said Michael Parker, Citi’s chairman of global shipping and logistics.
For example, the price of a high-end athletic shoe will hike by just 0.5% to 1% in zero-emission shipping, added Parker added.
The calculation is based on the consumer good carried by 2,500-teu containerships retrofitted to run on zero-emission fuels.
Also, the report stresses that governments need to play a “decisive role” in the green transition by providing direct grants, concessional loans to first movers, waving electricity taxes and grid fees for fuel production, and co-investing in zero emission pilot projects.
The regulators are also urged to consider the introduction of a carbon levy on conventional bunker fuels and usher in safety rules on the usage of zero-emission fuels.
“Governments have a crucial role in incentivizing and accelerating shipping’s green transition,” Global Maritime Forum head of research Kasper Sogaard said.
“By supporting first movers, governments can help generate the technology learnings and economies of scale that will allow the market to take over, similarly to the role governments has played within renewable energy technologies such as solar and wind.”
